Business is about investment and thus, when the time is right to sell, you want the best price you can get, but disposal of all or part of a business leads to a Capital Gains Tax. The normal rate can be 18% or 28% of qualifying assets.

Recognising that when the economy is stalling the sale or disposal of a business can be an important ingredient in kick-starting the market, the Entrepreneurs’ Relief Scheme reduces these tax percentages to 10% – in a nutshell, upon the sale of your business, you could pay less tax under this scheme.

Do you qualify?

There are, as you would expect, various eligibility criteria but the advantages are numerous;

• Sole traders and business partners will benefit in the disposal or sale of a business
• Investors with at least 5% shares in a company, as well as voting rights are also eligible
• Relief is available on assets you lent to your own business or personal company

Thus if you are a sole trader or business partner, owned the business for at least one year before the date of the sale or closure, and you sell or dispose of assets within three years of selling a business or closing it, you will qualify for the Entrepreneurs’ Relief Scheme.

In terms of investors in businesses, as well as the 5% shares and voting rights, in order to qualify under the scheme, you will also need to have been an employee or director and the activities of the company were in trading goods and services, rather than non-trading activities, such as investment services for example.

How much is your business worth?

Selling a business is a huge and very important step to take; on one hand, you want a sale to go through quickly, so you want to price your business competitively to spark interest but, if the price is too low you may lose out. Pricing it too high will mean it hangs around for a long time on the market too.

There are various methods of calculating the worth of a business – plucking a figure from the air and hoping for the best is not the best way forward.

Company Valuation Services has an online calculator tool that uses the Fair Market Value method and the Investment Value method as means of calculating. Commonly used together, these two means of determining the value of a business also take into account the current state of the market.

There are many variables that affects a market but, it is true to say that a well-priced and attractive business is a viable option for purchase, regardless of the economic conditions.

Why use both methods?

There is an assumption that the market value is the asking price and the only one that is important for the buyer. However, every buyer wants something different from a business – some buy as a long term investment, others as a way of making a decent return on their investment in a short space of time.

As a result, this interpretation of the Investment Value on its own may differ wildly from the Market Value figure. But, with the Entrepreneurs’ Relief Scheme providing a lesser rate of Capital Gains Tax, selling your business now could prove a lucrative move.