CGT on seling small busniess

DorotaD said:

Hi, I am new MIP and don't have any experience with business sale or acquisitions and would appreciate advise.
Client runs small sandwich shop, which she received as a gift from her husband two years ago. Husband bough business 8 years ago paid consideration for it, mostly goodwill as shop is on annual lease and there were only few pieces of equipment.

My client is separated from husband , but not divorced yet and selling business for consideration which is half of the buying cost. Business is not incorporated.

I am not sure if I can use original cost of business for calculating profit/loss on business disposal.

Many thanks.

It's been a while since I've handled spousal transfers, but I'd have thought the normal rules would apply - when the husband transferred the going concern, the CGT rules would disregard what the wife actually paid (i.e. £nothing), and instead treat the transfer as being at 'no-gain, no-loss', i.e. they would deem that the husband disposed of it for his CGT base cost.

So, given that there's no taper relief or indexation any more, the deemed proceeds when the business was transferred would be whatever the husband paid for it, and that's what you'd use as the base cost in calculating the wife's CGT.

I think above you're saying that she's going to sell for less than he paid, in which case there's no gain, and there's a loss instead, and therefore no CGT to worry about.

Incidentally, she could, in theory, use that loss to set-off against any other capital gains she might make this year, before she even starts to use up her Annual Exemption, so now would be a good time to make any profitable disposals, from a tax point of view at least.

Also, if there were a Capital Gain on her disposal of the business, it would at least qualify for Entrepreneurs Relief too.