October 29th, 2012 / Insight posted in

The best way of selling assets

GH writes: I operate as a sole trader in the IT sector and have been setting up various online businesses for myself. Now somebody wants to buy one of these and combine it with his existing online business. Is it best to put my venture into a limited company before I sell and, if so, how do I do that? Also, what are the tax consequences of any sale?

It often depends on what the buyer wants but I suspect that it will not be necessary for you to transfer your online business into a separate company just to facilitate the sale, writes Chris Lane, partner at Kingston Smith LLP.

Normally, buyers will check what they are buying and will carry out their own due diligence. Even if you put all the relevant assets into a new company, the buyer would still need to carry out the same due diligence. 
You should think of it as simply selling a list of assets. As part of the process you will need to document the assets and this will form a big part of the sale and purchase agreement.

From a tax point of view, there will be capital gains tax (CGT) to pay on any profit arising from the sale. Potentially, your first £1m of gain is covered by entrepreneurs’ relief and, as long as you have not already used this relief, will be taxable at 10% rather than the normal CGT rate of 18%. You will also have your annual allowance of £10,100 for the current year to reduce your taxable gains.