“A”, “B” and “C” are partners of an equal partnership valued at £1.2 Million.
“C” would like to sell her share as she feels now is the right time to retire.
Her share of the business which was built from scratch is £1.2 Million / 3 = £400,000
Business Asset Disposal Relief levies a flat rate of 10% on the gain subject to qualifying conditions
“C” will pay £400,000 x 10% = £40,000 on the sale of her share rather than the 20% rates that may apply if she was a Higher Rate Taxpayer based on her share of the partnership profits.
This enables business owners to offset the 10% relief on each business they own, all qualifying assets and on full or partial sales providing the qualifying conditions are met.
If “C” had made personal pension contributions as per the pension case studies, she would also be able to withdraw additional capital tax efficiently from her share of the partnership.
This case study also highlights the importance of having a Partnership Agreement in place to enable “C” to facilitate her decision to retire and take her share of the partnership profits.
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