Corporation Tax when you sell business assets
Work out a chargeable gain
The gain is usually the difference between what you paid for the asset and what you sold it for.
You’ll need to use the asset’s market value if your business gave it away, or sold it for less than it was worth to help the buyer.
You can deduct any costs, for example solicitors’ fees or Stamp Duty.
If you had the asset before December 2017
Before you work out your gain you need to work out how much you would have paid for the asset in today’s money using the HM Revenue and Customs (HMRC) Indexation Allowance.
This will make your gain smaller and mean you pay less tax.
How to work out the gain
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Work out the asset’s value when it was sold - this is usually the amount your company received.
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Deduct the amount your company paid for the asset. If it was not acquired in a normal commercial transaction you need to use the market value at the time.
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Deduct any money your company spent buying, selling or improving the asset, for example solicitors’ fees and Stamp Duty. (You cannot deduct maintenance costs.)
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If you had the asset before December 2017, use HMRC’s Indexation Allowance December 2017 guide for the month when your company sold the asset. Then find the figure (‘inflation factor’) for the year and month when your company bought the asset. Multiply this by the amount you paid for the asset. Deduct the total from your profit.
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If you made improvements to the asset, work out the effects of inflation in the same way. Deduct the total from your profit.
You now have your chargeable gain. You can ask HMRC to check your valuation by filling in a post-transaction valuation check form. Return it to the address on the form and allow at least 3 months for HMRC’s response.
Example
Your company sold an asset in November 2015 for £200,000.
Deduct the amount you bought it for in March 2001, which was £120,000. £200,000 - £120,000 = £80,000.
Deduct £10,000 spent improving the asset in June 2010. £80,000 - £10,000 = £70,000 profit.
Find the inflation factor in HMRC’s Indexation Allowance for March 2001 (0.509), and multiply it by the amount you bought the asset for. £120,000 × 0.509 = £61,080.
Find the inflation factor for the improvement costs (0.159), and multiply it by those costs (£10,000). 0.159 × £10,000 = £1,590.
Take these figures away from the profit. £70,000 - £61,080 - £1,590 = £7,330 chargeable gain.
If you make a loss when you sell an asset
You can reduce your total chargeable gains by deducting any capital losses.
You can only deduct capital losses from your chargeable gains - not from trading income or other profits.
The loss you can claim is reduced by any amount you’ve claimed as capital allowances.