Whatever reason you may have for wanting to sell a business, there are many things that you will need to consider before the transaction can go ahead. However, perhaps one of the most important factors that you will have to bear in mind is the issue of commercial stamp duty.
Payable from the moment that another party, or parties, purchase your company – whether in part or in full – the rate this is set at ultimately depends on a range of factors. And as it could vary significantly based on the value of your company and whether it is being sold in the form of assets or shares, this is something that you ought to think carefully about when searching for potential buyers.
Indeed, the manner in which the transaction is structured could result in you mitigating these costs and receiving a proportion of the savings that a vendor makes upon buying your business.
If you are selling shares in your company stamp duty will be charged at a flat rate of 0.5 per cent the consideration being paid for them. But bear in mind that this is set depending on the amount of money you receive for your shares, it does not have to be a reflection of its actual value.
With regards to selling a firm’s assets, meanwhile, the stamp duty attached to each of these is calculated separately depending on what category it falls under.
Stamp duty is no longer payable on the transfer of debts, goodwill or intellectual property, although this does apply to physical products, such as stock.
Business premises, however, are subject to stamp duty land tax (SDLT) and how much this is set at will depend on the amount of money it is being sold for.
Commercial property stamp duty rates for developments worth up to £150,000 and where the annual rent is more than £1,000 is set at one per cent, although if rental rates are below this then no tax has to be paid.
For properties sold for between £150,000 and £250,000, however, the SDLT rate is one per cent, with this rising to three per cent for those falling in the £250,000 to £500,000 bracket.
Those commercial properties that are valued at more than £500,000 will have a four per cent SDLT attached to them.
Before you promote any developments as being available for sale, it is worth your while to think twice about the price it is being advertised for in order to attract buyers.
Of course, if the commercial property – or properties – you are looking to sell are placed just above a certain SDLT threshold it may be a good idea to be willing to accept offers made that are beneath it.
Doing so means that not only will the purchaser of your property pay less for the development itself but also less in the form of stamp duty; however, this could allow you to sell off a company quicker and communicate to buyers that you are prepared to negotiate, you could still find you are able to sell your business for a reasonable and fair price.
By taking the time to consider carefully the stamp duty on sale of business before advertising that your organisation is available for purchase, you may be able to arrange for your company to be sold at a reasonable price and for much quicker then you originally thought!
