Selling an asset? Check the tax position first

Selling shares, property or another valuable asset can create a Capital Gains Tax liability.

Unfortunately, tax is sometimes considered only after the transaction has taken place. By then, opportunities to structure the disposal efficiently may have disappeared.

Before selling an asset, establish its original cost and identify any allowable expenditure that could reduce the gain. Depending upon the asset, this might include certain acquisition and disposal costs or qualifying expenditure on improvements.

It is also important to identify capital losses. Losses brought forward from earlier years, or losses arising on other disposals, may sometimes be available to reduce taxable gains.

The timing of a disposal can also matter. Completing a transaction shortly before or shortly after 5 April may move the gain into a different tax year and can affect when the tax becomes payable or how much of the annual exempt amount is available.

Transfers between spouses and civil partners can sometimes form part of legitimate tax planning, but advice should be taken before assets are transferred.

Special reporting and payment rules apply to certain disposals of UK residential property, making early advice particularly important. Usually, these transactions must be reported and any Capital Gains Due needs to be paid within 60 days of completion

Business owners contemplating the sale of shares or business assets should also establish whether any specific reliefs might be available and whether the conditions need to be satisfied for a particular period before the sale.

Tax should rarely be the only factor determining whether an investment, property or business is sold. Nevertheless, knowing the likely liability before signing an agreement means that the tax consequences can form part of the decision.

If you are contemplating a significant disposal, speak to us before completing the transaction rather than afterwards.