Transferring ownership is different from selling your business. This journey covers succession planning - passing your business to family, managers, partners, or employees. The approach, tax planning, and timelines differ significantly from arm's-length commercial sales.
Compare the routes out of your business - selling, passing it to family, selling to employees, stepping back or closing
Family succession: Transfer shares gradually over time using gift hold-over relief and Inheritance Tax Business Relief. MBO: Structure the sale to allow managers to fund the purchase, often with deferred payments. Partner buyout: Follow partnership agreement terms or negotiate exit. EOT: Sell a controlling interest to an Employee Ownership Trust for Capital Gains Tax relief on part of the gain.
Capital Gains Tax on gifts, gift hold-over relief, Business Relief and handing over the running of the business
Navigate the business sale process from preparation to completion and beyond - valuation, finding buyers, due diligence, TUPE, deal negotiation, and post-sale obligations.
Understand Business Asset Disposal Relief and how it fits with gift hold-over relief and Inheritance Tax planning
Business Asset Disposal Relief (BADR)
BADR taxes qualifying gains at a fixed relief rate, up to a lifetime limit. For disposals from 6 April 2026 the rate is 18%, the same as the basic rate of Capital Gains Tax, so it saves tax only on gains that would otherwise be taxed at the higher rate of 24%. You must meet the conditions, including owning the business or at least 5% of the company, for 2 years before the transfer.
Rate for disposals on or before 5 April 2025
10%
Rate for disposals 6 April 2025 to 5 April 2026
14%
Rate for disposals from 6 April 2026
18%
Lifetime limit
£1 million of gains (higher for some disposals before 11 March 2020)
Business Asset Disposal Relief (opens in a new tab)
Gift hold-over relief
When you give business assets or shares in a trading company to family, you and the recipient can jointly claim to postpone the Capital Gains Tax until the recipient disposes of them. On a sale for less than market value, relief covers the part of the gain not matched by what you were paid.
What it does
No Capital Gains Tax is paid on the gift. The recipient's base cost is reduced by the held-over gain, so it is taxed when they later dispose of the asset
Business assets that qualify
Assets used in a trade, profession or vocation carried on by you, your partnership or your personal company
Shares that qualify
Shares in an unlisted trading company or holding company of a trading group, or listed shares in your personal company
Sale at less than market value
Relief applies to the part of the gain not covered by what you were paid; any payment above your original cost is taxed now
Who claims
The giver and the recipient jointly. Only the giver signs where the recipient is the trustees of a settlement
Claim form
The claim form that accompanies HMRC helpsheet HS295
Time limit
4 years from the end of the tax year in which the gift was made
Recipient not UK resident
Relief is generally not available, except on gifts of direct or indirect interests in UK land
Recipient leaves the UK
If the recipient stops being UK resident within 6 years after the end of the tax year of the gift, still holding the asset, the held-over gain becomes chargeable
A gift, or a sale for less than the asset is worth, to a family member or other connected person is treated as a disposal at market value, so it can create a gain even though you receive little or nothing. Hold-over relief postpones that gain rather than removing it.
Relief is not available for a gift to the trustees of a settlement in which you retain an interest. It can be restricted where only part of an asset was used in the business, or where a company whose shares you give holds investments as well as trading assets. A separate hold-over relief applies to gifts of any asset that are immediately chargeable to Inheritance Tax, such as most gifts into a trust.
Capital Gains Tax relief on gifts and similar transactions (HS295) (opens in a new tab)
Employee Ownership Trust (EOT)
Selling a controlling interest in your company to an Employee Ownership Trust that benefits all eligible employees gives Capital Gains Tax relief on part of the gain. You cannot also claim Business Asset Disposal Relief on the same shares.
Relief rate (before 26 November 2025)
100% (no CGT payable on qualifying disposal)
Relief rate (from 26 November 2025)
50% of gain relieved, 50% held over until trustees sell
Clawback period
4 tax years following year of disposal
UK trustee residence
Required from October 2024
EOT relief provides significant CGT savings compared to standard rates. From November 2025, 50% of the gain is immediately relieved, with the remaining 50% deferred until the trustees dispose of the shares. This compares to 18% BADR rate (from April 2026, up from 14% between April 2025 and April 2026) or 24% standard CGT for non-BADR gains.
Capital Gains Tax - Employee Ownership Trusts (opens in a new tab)
Qualifying conditions, the trust deed, funding the purchase and employee bonuses
Navigate the process of changing your business's legal structure - from sole trader to limited company, partnership, or LLP.
Why restructure before transfer?
You might need to restructure if you are a sole trader wanting to transfer shares (incorporate first), splitting a partnership before one partner exits, or separating trading and property assets before sale.
Legislation
Section 162 Taxation of Chargeable Gains Act 1992
Effect
Defers CGT by reducing base cost of shares received
Claim required
Automatic (no claim needed before April 2026)
Claim required from April 2026
Must claim in Self Assessment return for transfers from 6 April 2026
Conditions for Incorporation Relief:
Be a sole trader or in business partnership Transfer the business as a going concern Transfer all assets (except cash) Receive shares wholly or partly in exchange If receiving mixed consideration (shares plus cash), relief only applies to the share proportion. The deferred gain becomes payable when shares are eventually sold.
Incorporation Relief (HS276) (opens in a new tab)
Negotiate terms, draft agreements, and complete the legal transfer of ownership
Sale and Purchase Agreement or share transfer
Even family transfers need proper legal documentation. A Sale and Purchase Agreement protects both parties with warranties, indemnities, and clear terms. Share transfers need a stock transfer form.
In a business acquisition the buyer relies on warranties (the seller's statements about the business) and indemnities (the seller's promises to compensate for specified losses) to protect against undisclosed liabilities and misstatements.
Warranties and indemnities A warranty is a statement of fact by the seller about the business. If it is untrue, you can claim damages for the loss it causes, and you have to show that loss. An indemnity is the seller's promise to compensate you for a specified loss or liability, whether or not a warranty has been broken. What an indemnity covers depends entirely on its wording.
Financial warranties
Accounts accurate, no undisclosed liabilities, debtors collectable
Legal warranties
No pending litigation, contracts valid, intellectual property owned
Operational warranties
Plant in working order, supplier contracts transferable
Employment warranties
No grievances or threatened claims, TUPE information accurate
Compliance warranties
Regulatory requirements met, licences valid
Common indemnities Indemnities usually cover specific known risks where the amount is uncertain:
Tax liabilities for periods before completion Known litigation or tribunal claims Environmental clean-up costs Specific contractual liabilities Regulatory fines or penalties for conduct before completion Limits on warranty claims The sale and purchase agreement sets the limits on your claims. These are matters for negotiation and the contract wording.
Time limit
Set in the agreement; without one, the statutory limit is 6 years for a simple contract and 12 years for a deed (England and Wales)
Financial cap
Set in the agreement, often by reference to the price
Individual claim threshold
Claims below an agreed amount can be excluded
Aggregate threshold
Total claims may have to pass an agreed amount before you can recover
Disclosure
Matters the seller discloses against the warranties are normally excluded from claims
Warranty and indemnity (W&I) insurance Instead of, or alongside, a claim against the seller, the parties can use W&I insurance. With a buyer-side policy you claim against the insurer for a warranty breach rather than against the seller. With a seller-side policy the seller insures its own warranty exposure.
Stamp Duty on share transfers
Stamp Duty is due on a paper share transfer where the price is over the threshold, and the form must be sent to HMRC for stamping. Electronic share transfers pay Stamp Duty Reserve Tax instead. There is no Stamp Duty on shares given for nothing.
Stamp Duty rate
0.5% of consideration, rounded up to the nearest £5
No duty
Consideration of £1,000 or less (certificate 1)
Send to HMRC
Email a copy to stampdutymailbox@hmrc.gov.uk
Deadline
Within 30 days of the form being signed and dated
Processing time
HMRC aims to deal with 80% of forms within 15 working days
Paper share transfers are common for private company shares. You send HMRC a copy of the stock transfer form, for example a scanned PDF, and pay the Stamp Duty before HMRC will process it. HMRC says you should not post your form. If you cannot submit electronically you may post a notification instead, with your contact details, but you must not post original documents because HMRC will not retain or return them.
Paying late, or paying the wrong amount, can lead to a penalty and interest.
Stamp shares and securities (opens in a new tab)
Understand TUPE requirements when the business changes hands - employees transfer automatically with their existing rights
TUPE applies when the employer changes
When a business or its assets move to a new owner as a going concern, including from a sole trader or partnership to a successor, employees transfer automatically under TUPE with their existing terms, pay, and continuous service. Both outgoing and incoming employers have duties to inform and consult. TUPE does not apply to a transfer of company shares, because the company remains the employer.
Both the old and new employer have information and consultation duties before a TUPE transfer.
Who must be informed
Employee representatives (trade union reps or elected representatives)
When to inform
Long enough before the transfer to enable meaningful consultation
Information required
Fact of transfer, when it will happen, reasons for transfer, legal/economic/social implications
Measures information
New employer must provide details of any planned changes to old employer (to pass to reps)
Consultation required when
Either employer proposes to take measures affecting employees
Consultation scope
Must consult with a view to seeking agreement (not just informing)
Direct consultation permitted
Where there are no existing representatives and you have not invited employees to elect any, you may inform and consult each affected employee directly if you employ fewer than 50 people or fewer than 10 employees are transferring (for transfers on or after 1 July 2024)
Consultation requirements (opens in a new tab)
Employee liability information
The outgoing employer must give the new employer written information about the transferring employees before the transfer. This covers their particulars of employment, disciplinary and grievance records, and claims.
The old employer must provide written employee liability information to the new employer.
Deadline
At least 28 days before the transfer (unless not reasonably practicable)
Identity and age
Name and date of birth of each transferring employee
Employment particulars
Information from the written statement (job title, start date, pay, hours, notice period)
Disciplinary/grievance history
Any formal action taken in previous 2 years
Tribunal claims
Any claims brought against old employer in previous 2 years, or reasonably anticipated
Collective agreements
Details of any collective agreements affecting transferring employees
Penalty for failure
Tribunal can award minimum £500 per employee for failure to provide ELI
Employer responsibilities (opens in a new tab)
TUPE consultation failure penalties
Compensation employees can claim if employers fail to properly inform and consult about a TUPE transfer.
If employers fail to inform and consult properly before a TUPE transfer, employees can claim a protective award from the employment tribunal.
Maximum protective award
Up to 13 weeks' actual pay per affected employee
Weekly pay cap
No statutory cap on weekly pay for TUPE awards (unlike redundancy)
Joint liability
Both old and new employer can be liable (tribunal apportions responsibility)
Just and equitable
Tribunal awards what is "just and equitable" considering seriousness of failure
Claim deadline
6 months minus 1 day from date of transfer, for transfers on or after 1 October 2026 (3 months minus 1 day for earlier transfers), extended by ACAS early conciliation
Who can claim
Employees or their representatives
Note: This is separate from unfair dismissal claims. Employees dismissed because of the transfer can also claim compensation for automatically unfair dismissal (basic award plus compensatory award).
Employment tribunal claims (opens in a new tab)
What to do when a partner retires or leaves and the others buy out their share
Agree when the partnership ends, finish its business and pay what it owes, then share out what is left.
Partnership buyout options
Check your partnership agreement for buyout terms, valuation methods, and payment structures. Without clear agreement terms, the Partnership Act 1890 defaults apply. You may need to formally dissolve and reform the partnership, or use a direct purchase of the departing partner's share.
Under the Partnership Act 1890, certain events automatically dissolve a partnership unless the partnership agreement provides otherwise. Most written agreements exclude automatic dissolution on death or bankruptcy.
Expiration or notice (s.32)
Fixed term expires, single venture completes, or any partner gives notice (if no fixed duration)
Death of partner (s.33)
Automatic dissolution unless agreement provides otherwise
Bankruptcy of partner (s.33)
Automatic dissolution unless agreement provides otherwise
Charging order on share (s.33)
May be dissolved at option of other partners if partner's share is charged for separate debt
Illegality (s.34)
Any event making partnership business unlawful
Dissolution by court order (s.35)
A court may order dissolution on these grounds:
Mental incapacity of a partner
Permanent incapacity of a partner
Partner's conduct prejudicial to business
Wilful or persistent breach of agreement
Business can only be carried on at a loss
Just and equitable to dissolve
Partnership Act 1890 (opens in a new tab)
Capital gains on partnership exit
When a partner leaves and is paid for their share of the partnership's assets, including goodwill, they may make a capital gain. It may qualify for Business Asset Disposal Relief.
Transparency principle
CGT assessed on individual partners, not the partnership
CGT basic rate (from 30 Oct 2024)
18%
CGT higher rate (from 30 Oct 2024)
24%
Annual exempt amount
£3,000 per person
Business Asset Disposal Relief rate (2024/25)
10%
BADR rate (from 6 April 2025)
14%
BADR rate (from 6 April 2026)
18%
BADR lifetime limit
£1,000,000
BADR claim deadline
31 January in second year following tax year of disposal
Partnerships are treated as 'transparent' for CGT under TCGA 1992 s.59(1). When assets are distributed, gains attributed to partners not receiving the asset are charged immediately. Gains attributed to partners receiving the asset are deferred by reducing their CGT cost base.
Business Asset Disposal Relief (HS275) (opens in a new tab)
Structure a transition period to transfer knowledge, relationships, and operational control to the new owner
What you need to do after the transfer completes - notifications, tax returns, and record keeping
Notify HMRC and keep records
Report the disposal on your Self Assessment or Corporation Tax return, and make any relief claims within their time limits. Keep records of the transfer, valuation, and tax calculations for as long as the tax rules require (5 or 6 years, counted from the tax year or financial year they relate to), and evidence that you met the conditions for any relief you claimed.
General principle
Retention period runs from when records created, not when business closed
VAT after deregistration
6 years from date of transaction/invoice
Sole trader cessation
5 years from 31 January deadline for final tax year
Partnership dissolution
5 years from final return deadline (each partner should retain copies)
Company dissolution - directors
Directors remain responsible for record-keeping after striking off
Business owners must continue to store records securely after closure. Storage options include personal secure storage, professional document storage services, or cloud storage (if digital requirements are met). Records must remain accessible if HMRC enquires.
Sole trader succession - transfer the business or incorporate first
As a sole trader, you own the business personally, so there are no shares to transfer. You can give or sell the business and its assets to your successor, and gift hold-over relief can postpone the Capital Gains Tax on business assets you give away.
Comparison to other structures:
If you want to hand over ownership gradually, incorporating first lets you transfer shares over several years. Incorporation Relief can postpone the Capital Gains Tax on moving the business into the company.
When this matters: If you want to transfer ownership gradually over several years, incorporation provides more flexibility than remaining as sole trader.
Incorporation Relief guidance (opens in a new tab)
Limited company - flexible transfer options
Limited companies offer the most flexibility for ownership transfer. You can gift or sell shares gradually, use share schemes to transfer to employees, sell to an Employee Ownership Trust, or restructure before sale.
Comparison to other structures:
Consider the timing of transfers - Business Asset Disposal Relief needs the conditions met for 2 years, an Employee Ownership Trust must keep benefiting all eligible employees, and gift hold-over relief on shares needs the company to be a trading company.
When this matters: Plan transfers 2-5 years ahead to maximise tax efficiency and allow time for gradual handover.
Employee share schemes (opens in a new tab)
Partnership - follow the partnership agreement
Your partnership agreement should specify how partners can exit and at what valuation. Without clear terms, disputes can arise. Under the Partnership Act 1890 default rules, if the others carry on the business without settling up, the departing partner can claim either a share of the profits made using their share or interest on it until they are paid.
Comparison to other structures:
If the partnership agreement is silent or unclear, consider amending it before any partner exit to establish clear terms for valuation, payment timing, and ongoing obligations.
When this matters: Review and update your partnership agreement regularly, especially before any anticipated ownership changes.
Partnership guidance (opens in a new tab)