Selling Your Business A Tool To Reduce Capital Gains Taxes

Business owners and management teams that are contemplating a sale of their company are now evaluating the impact that the 'timing of sale' has on the net proceeds received, as a result of the upcoming 33% capital gains tax increase. Many business owners have seen a decline in revenue and profit over the last several years and are expecting an improvement in the future. Since most business valuations are derived, largely in part, by the earnings the company generates, the general consensus is that a higher value will be obtained by delaying the sale. Achieving the highest business valuation is often the sole concern with little consideration to the net after tax dollars. Many business owners are now re-evaluating this thought process given the significant capital gains tax increase that will take place on January 1, 2011.

Investors who normally buy shares, property and unit trusts, Oeics will be subject to the new capital gains hikes and so should look to realise some gains where they can, to crystallise them in this tax year pre budget.

And it isn't just a new rate of tax. Effectively, from 6th April 2008, we will have a whole new and much simpler property tax regime. The new flat rate system will replace the taper relief regime introduced by Gordon Brown in 1998. From April we will no longer be concerned with how long an asset has been held or whether it qualifies under the rather tortuous 'business asset' rules - the flat rate of 18% will apply to everything.

Institutional investors have been buying agricultural land for years due to the sustained increase in demand for food, feed and fuel, and lack of supply of good land. This has ensured that UK farm land investment has returned an annual average of around 10% in capital growth, whilst also allowing investors to capture income in the form of rent charged to farmer working the land.

If you're a collector of fine art, jewelry, planes, boats, race horses, or anything of value, you owe it to yourself to look into the benefits of the Private Annuity Trust. There is no minimum or maximum value for property that can be transferred into a Private Annuity Trust. The Trust structure, as a planning tool, is a resource that can help you pass wealth to generations of your family, without worry about losing large chunks to taxes at each transfer. For many investors, it may be a key to safe, smart, investing.

Capital gains tax is a complicated area of the Taxation Law it needs to be applied carefully to identify the correct result when making a determination about whether capital gains tax applies to a particular transaction or not. Inheritance is one of the most complicated areas of capital gains tax. You need to keep special records in relation to the acquisition of capital gains tax asset through the inheritance except where it is a pre-CGT asset which you acquired before 20 September 1985.

The tax rules that apply on the capital gains tax differ for the business assets and non-business assets. A rule that was applied in 1998 was about the holding period of the asset and the tax on the capital gain. According to the rule, the longer an asset is held for, the lesser is the tax that has to be paid over the gains from that asset.

I learnt many years ago that you should regard your money as a machine that generates cash. At times the machine may grow bigger or smaller, but as long as it continues to generate the cash, that is OK. The cash may be income, interest, dividends or capital gains - it doesn't matter. It's still money in your bank account. And in the short-to-medium term, as long as you don't need to touch your capital, it doesn't matter if it shrinks. (Actually you gain a little bit - investment fund managers take a fee each year that is usually calculated as a percentage (1% - 1.5%) of the fund value, so whenever the fund shrinks, their fee falls).

It is clear that no property investor can accurately project long term future capital growth rates, future rentals or the risk profile of a specific property investment strategy and it looks like the answer to what strategy is best is still open, or is it?