Indexation Relief
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Published: 29 Nov 2017
The Autumn Budget for 2017-18 delivered by the Chancellor on 22nd November was a fairly uneventful affair as far as selling a business or a company was concerned.
Indexation relief frozen
However, the Chancellor has frozen the indexation relief arising on gains on sale of assets by companies as opposed to individuals with effect from 1st January 2018.
Where asset values, particularly property values, rose with inflation, the cost of sale with indexation avoided the inflated gain being taxed. So any inflationary gains from 1st January 2018 will be taxable. The impact of increased corporation tax on gains on sale will not have an immediate effect, but it may have in the long term.
Also, where assets are sold out of the company (prior to liquidating the company) as opposed to selling shares in the company, the loss of indexation relief will, over the years, increase the tax cost of sale.
What does this mean for the seller and buyer of a company?
This can encourage the seller to negotiate with the buyer the sale of shares as opposed to a sale of assets for a lower price, with each party being financially better off with less capital gains tax to pay and possibly stamp duty if land and buildings are involved.
If you are in this situation, please do not hesitate to contact David Cane on 07749 080 806 or send an email.
