Tax advice: how to sell a bus iness

Preparing to sell your business?

As someone who recently sold his business, Pete Miller, Head of Corporate Tax at Jerroms Miller Specialist Tax, has first-hand experience. Here, he explains why professional tax planning advice is so important when getting ready to sell

As you may know, I recently sold The Miller Partnership into a joint venture company alongside the specialist tax advisory arm of Jerroms based in Solihull, West Midlands to form Jerroms Miller Specialist Tax.

Part of the transaction involved incorporating – ie, transferring – my existing business into a company, which, as you can imagine, threw up some interesting practical points.

Generally, incorporation relief allows a company to incorporate without any tax implications – but to qualify for this tax relief, all business assets, except for cash, must be transferred to the company.

The transfer also takes account of any trade debtors, so from a taxation perspective, the sale needs to be included in the partnership profits and taxed on the partners. However, because the debtors are transferred to the company on incorporation, the cash is payable to the company, not to the former partners. This raises the dilemma of how to extract the cash from the company without incurring an additional tax charge, which simply cannot be done.

Such a scenario clearly illustrates the importance of careful tax planning and taking professional advice when preparing your business for sale. In these circumstances, reducing debtors close to zero wherever possible upon incorporation would help manage the impact of the unavoidable double tax charge.

Anyone who’s been part of a transaction involving a change in business structure, knows that it carries a heavy administrative burden. From compliance areas such as updating terms of business and letters of engagement, through to IT requirements – including secure data migration and configuring the new working environment with remote capabilities – there’s a lot to address. And, of course, there’s brand development, its wider implementation and communicating any changes with clients and other stakeholders.

While these tasks might appear trivial, they are integral to the overall success of the transaction and require both time and attention, which can detract from the day-to-day running of the business. Having competent advisers on side throughout the process is invaluable to ensure a smooth and ultimately successful transition.

For more advice on selling your business, just email petemiller@jerromsmiller.co.uk or nickwright@jerromsmiller.co.uk or call Pete on 079843 53426 or Nick on 078912 03889.

I RECENTLY SOLD THE MILLER PARTNERSHIP INTO A JOINT VENTURE COMPANY ALONGSIDE THE SPECIALIST TAX ADVISORY ARM OF JERROMS