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Capital Gains Tax on business assets: the basics
Capital Gains Tax reliefs for business assets
How to calculate capital gains and losses on business assets

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Capital Gains Tax on business assets: the basics

Capital Gains Tax on business assets: the basics

You may have to pay Capital Gains Tax if you make a profit or gain when you sell, give away, exchange or otherwise dispose of all or part a business asset.

A business asset could be shares, land and buildings, a business franchise, fixtures and fittings or even the goodwill of the business, ie its good name or reputation.

If you own your own business, or you're a member of a partnership, you usually have to report capital gains and losses on your Self Assessment tax return.

It's different if your business is carried on by a limited company, in which you may be a director or shareholder - any profits on assets disposed of form part of the total profits of the company on which it pays Corporation Tax.

On this page:

What is Capital Gains Tax?
Typical business assets
Working out Capital Gains Tax
Reporting a gain or loss
Partnerships
Entrepreneurs' Relief and other tax reliefs
More useful links

What is Capital Gains Tax?

Capital Gains Tax is a tax on the profit or gain you make when you sell or ‘dispose of’ an asset.

You usually dispose of an asset when you cease to own it - for example if you sell it, give it away as a gift, transfer it to someone else or exchange it for something else.

In some cases you're treated as if you've disposed of an asset. For example a business asset has been destroyed and you've received a capital sum, such as an insurance payout, by way of compensation.

It's the gain you make - not the amount of money you receive for the asset - that's taxed.

Find out more about Capital Gains Tax basics

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Typical business assets

Business assets are assets that are related to trading or to your business in some way. The assets may be owned by yourself or by the business partnership.

They include all forms of:

land and buildings used as business premises, eg a shop, factory or workshop
fixtures and fittings, eg shelves or a counter in a shop
plant and machinery, eg a computer or digger
goodwill, eg the good name or reputation of a business that it's built up over the years it's been operating (this can have a financial value)
shares, eg in a personal company
registered trade marks

Find out more about personal companies in the glossary

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Working out Capital Gains Tax

To work out your Capital Gains Tax you'll need to look separately at each asset disposed of that's liable to Capital Gains Tax and in straightforward cases:

Take the disposal proceeds (usually the amount received) and deduct your costs and tax reliefs to work out each gain or loss.
Add together all of your gains for that tax year.
Add together all of the losses you've made for that tax year.
Deduct any allowable losses you've made that year from the gains to work out the overall gain or loss.
If the overall gain is below the annual tax-free allowance (known as the ‘Annual Exempt Amount’), there's no Capital Gains Tax to pay. The Annual Exempt Amount for individuals is £9,600 for 2008-09 and £10,100 for 2009-10.
If the overall gain is above the Annual Exempt Amount, you may be able to deduct unused losses from earlier years.
If the overall gain is still above the Annual Exempt Amount, you deduct the Annual Exempt Amount and pay tax at 18 per cent on the balance.

If you've made any losses you'll need to claim them in order to set them off against your gains. To find out more about this - and working out gains and losses - see the links below.

Reporting a gain or loss

Capital Gains Tax is paid through the Self Assessment system and will be calculated as part of your Self Assessment tax return. If you haven't received a tax return, but think you need one, you should contact your Tax Office. You may face a penalty if you don't.

If you own your own business, you'll usually complete a Self Assessment tax return (form SA100) and the Capital Gains Tax summary pages (form SA108).

Partners in business partnerships usually need the same forms, but in addition the partnership’s tax return should include details of disposals on the Partnership Disposal of Chargeable Assets pages (form SA803).

You must attach a calculation of each gain or loss with your tax return.

Partnerships

When you're carrying on a business in partnership, each of the partners is treated as owning an ‘interest in’ (or a share in) each partnership asset.

You'll need to fill in the Capital Gains summary pages (form SA108) of the Self Assessment tax return if:

the partnership has disposed of an asset during the year eg it sold part of its business premises
there's been a change in the partnership during the year, eg a new partner joined and you've now got a reduced share in the partnership assets
you left the partnership during the year

You'll each need to work out the gain or loss arising on your interest in (or share in) the asset.

Example

Ann and Barry are equal partners in a business partnership - each have a 50% share in the partnership assets.

They bought their office premises in January 2000 for £100,000.

They sell the office premises in September 2008 for £140,000.

To work out their gain each partner will include purchase costs of £50,000 (£100,000 x 50%) and disposal proceeds of £70,000 (£140,000 x 50%).

Each partner has to include the gain on their tax returns and pay any Capital Gains Tax due.

See more examples in the latest helpsheet on partnerships - Help Sheet 288 (PDF 71K)

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Entrepreneurs’ Relief and other tax reliefs

If you own your own business or you're a member of a partnership, you may be able to claim tax relief on the business assets you sell or dispose of.

Typical reliefs are:

Entrepreneurs' Relief
Business Asset Roll-Over Relief
Incorporation Relief
Gift Hold-Over Relief

More about Capital Gains Tax reliefs for business assets

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