Capital Gains Tax for Business
Capital Gains Tax is a tax applied on the profit you make when you sell, transfer or dispose of all or some part of your asset. The tax does not apply for the total amount you receive.
Taxes may be applicable on business assets like land and buildings, fixtures, plant and machinery, shares, and registered trademarks in case if you have gained profit when selling. So, calculating your gain is the first thing you need to do. However, the taxes should not be paid on the gifts to your partners or charities.
If you are a self-employed or sole trader or a business partner, you have to pay Capital Gains Tax. On the other hand, Limited companies have to pay Corporation Tax on profits from selling their assets.
The difference between what you paid for asset and later what you sold for is the gain. The market value can be used if you gave it away as a gift, inherited the asset or sold the asset in the less price or you owned it before April 1982.
You can deduct certain costs from fees, Stamp Duty Land Tax and VAT for improving your asset from your gain. However, costs from interest on loan to buy an asset and business expenses cannot be deducted.
When you gain a profit when selling your asset, reporting and paying Capital Gains Tax is a must. For reporting, there are professional accountants to help you. They also know that eligibility of tax relief can help you reduce or delay the Capital Gains Tax.
The types of relief are:
• Entrepreneur’s Relief
• Business Asset Rollover Relief
• Incorporation Relief
• Gift Hold-Over Relief
• Private Residence Relief
The eligibility and description of these reliefs varies from one another.
When you sell or dispose of your main home, the Private Residence Relief is available and Capital Gains Tax is not to be paid. If any part of your home has been used for business, then Capital Gains Tax needs to be paid on that part when selling.
Despite being a limited company, becoming a partnership or sole trader may be able to get Disincorporation Relief.
If you gain the company’s assets when the business structure changes, Capital Gains Tax must be paid when selling them later. While doing so, it is important you use their value along with Disincorporation Relief.
If you want to discuss about the Capital Gains Tax, get in touch with our tax accountants today at email@example.com.