Recently, it was announced that the Autumn Budget would be cancelled as the government explained that they had taken the view that “now was not the right time to outline long-term plans given the ongoing COVID-19 pandemic”.
Prior to this, it had been expected that the Chancellor would announce changes to the rates of capital gains tax in the Autumn Budget which would have directly impacted business owners preparing their business for sale.This would have followed the changes to entrepreneurs’ relief which were announced in the March 2020 Budget, under which the lifetime limit was reduced from £10 million to £1 million for disposals made on or after 11 March 2020. It was anticipated that as part of the reforms, Entrepreneurs Relief would be scrapped entirely.
The decision to cancel the Autumn Budget was therefore a welcome decision for many business owners in the process of selling their business, or thinking of doing so in the near future. However, it seems likely that the expected changes will be introduced, albeit not until next year. The next few months may provide business owners with a final window of opportunity to prepare their business for sale and sell their business, whilst receiving the most generous tax treatment on the gain.
Useful Tips for Preparing your Business for Sale
We have previously set out our tips for preparing your business for sale. These will both benefit your business going forward whilst also making the sale process easier should you decide to sell. These include the following:
- Ensuring that the company’s records and statutory books are up to date;
- Ensuring that all of the company’s contracts with its key suppliers and customers/ clients are in writing and have been signed;
- Ensuring that all of your employment contracts are in writing and have been signed by the employees;
- Collating information regarding the properties that your business operates from;
- Making sure that your company has taken appropriate measures in accordance with the government Covid-19 guidance and can demonstrate how it is has, for example, implemented contingency plans, updated its health and safety policies and taken steps to implement social distancing;
- Registering any intellectual property rights that the company owns; and
- Registering with the Information Commissioner’s Office (ICO) and having policies and procedures in place so that you are able to demonstrate full compliance with data protection legislation to a prospective purchaser.
In addition to preparing your business for sale, business owners should also think about the different exit options available to them. These include a share or asset sale, a management buyout or establishing an employee ownership trust. There are a range of factors to consider when deciding which option will be most suitable to you. Factors which are likely to shape your decision will include your future plans and whether you wish to maintain a role in the business and also the tax treatment of each type of exit.
If you would like to get in touch to discuss how to prepare your business for sale or which exit strategy you may use in the case of a sale, please contact a member of our Corporate Law team.