October 26, 2018

You should think carefully about the Inheritance Tax consequences if you are selling your business.

Whilst a business will usually benefit from 100% Business Relief for Inheritance Tax provided that you have owned it for at least two years before death, cash proceeds of a sale will be subject to Inheritance Tax.

Business Relief works by reducing the value of a business or its assets when working out how much Inheritance Tax has to be paid.

There are exceptions. You can’t claim Business Relief if the company:

  • mainly deals with securities, stocks or shares, land or buildings, or in making or holding investments
  • is a not-for-profit organisation
  • is being sold, unless the sale is to a company that will carry on the business and the estate will be paid mainly in shares of that company
  • is being wound up, unless this is part of a process to allow the business of the company to carry on

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You can’t claim Business Relief on an asset if it:

  • wasn’t used mainly for business in the 2 years before it was either passed on as a gift or as part of the will
  • isn’t needed for future use in the business
  • also qualifies for Agricultural Relief

Are you thinking about selling your company? We work together with tax advisors and accountants to make sure that the sale is structured in a tax efficient way.

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