Corporation Tax on Selling Business Assets: What UK Limited Companies Need to Know

“In this world, nothing can be said to be certain, except death and taxes.” Benjamin Franklin wasn’t wrong — and if you’re a UK business owner, you’ve likely felt the sting of Corporation Tax when selling business assets.

Let’s make that sting a little less sharp.

At Cannon Accountants, we’ve helped many business owners navigate the unexpected tax bill that comes from selling a company asset. I remember one startup founder in Kent who had to sell a commercial unit. They were shocked to find out the gain was taxable. It had never crossed their mind. What made it worse was they’d already reinvested some of the proceeds before speaking to us, leaving a surprise Corporation Tax bill and a scramble to rework their cash flow.

Let’s break it down so that doesn’t happen to you.

What happens when a limited company sells a property?

How is property gain calculated for Corporation Tax?

When your company sells a property — say an office building, shop, or warehouse — it will need to calculate whether there's a profit (or “gain”) on the sale. That gain is subject to Corporation Tax.

Here’s how it works. You start with the sale price, then subtract the original purchase price, plus any costs of buying, improving, and selling the property. The difference is the chargeable gain.

Let’s say your company bought a building for £200,000 and later sold it for £250,000. Over the years, you spent £10,000 installing a new roof and £5,000 in legal and surveyor fees at the time of sale. Your calculation would look like this:

- Sale price: £250,000

- Costs: £200,000 + £10,000 (improvements) + £5,000 (fees) = £215,000

- Gain: £250,000 - £215,000 = £35,000

That £35,000 is added to your company’s taxable profits and taxed at the Corporation Tax rate, which is currently 25% for companies with profits over £250,000 (as of 2025). Smaller profits may qualify for marginal relief.

Are there any reliefs or deductions available?

Although the indexation allowance, which used to account for inflation, was frozen in January 2018, it can still apply to assets acquired before that date. For example, if you bought a property in 2015, you might still get an uplift for inflation up to December 2017. That can reduce your gain and lower your tax bill.

You can also deduct what HMRC calls “enhancement expenditure” — in other words, improvements that increase the value of the asset. Routine maintenance like repainting or replacing broken fixtures doesn’t count. But building an extension or converting space for rental use might.

What happens if the property is gifted or undervalued?

Even if your company gives away the property or sells it for less than it’s worth (say, to a director’s relative), HMRC will still assess the gain based on market value. That means you’ll be taxed as though you sold it at full value. This can catch people off guard.

We had a client who transferred a property to a sister company for £1, thinking they could avoid tax until they sold it on later. HMRC challenged the transaction and assessed the tax on the full market value. It’s a good reminder to always seek professional advice before gifting or transferring assets.

Is Corporation Tax payable on the sale of goodwill or intellectual property?

What qualifies as goodwill or intellectual property?

Goodwill is the reputation and customer loyalty that makes your business more valuable. Intellectual property (IP) includes assets like trademarks, copyrights, patents, and even custom software or proprietary processes. These are called intangible assets because you can't touch them — but they can be extremely valuable.

Are different tax rules applied to intangible assets?

Yes, intangible assets are treated under a separate set of tax rules known as the Intangible Fixed Assets (IFA) regime. If your company acquired or created the asset after 1 April 2002, the gain is usually treated as part of trading profits. That means the profit from selling, say, a software license or brand name is added to your company’s other trading income and taxed at the Corporation Tax rate.

Do historical acquisition dates affect taxation?

Yes, and this is where it gets tricky. If the intangible asset was acquired before 1 April 2002 — or acquired from a related party who held it before that date — the gain might still fall under the capital gains regime. That’s more common with older businesses or restructures involving family companies.

In short: the age of the asset, how it was acquired, and who owned it before all affect how it’s taxed. Keeping thorough records is essential.

How is the gain calculated when a company disposes of a business asset?

What costs can be deducted?

When selling any business asset, not just property, the company can deduct certain costs when calculating the gain. These usually include:

- The original purchase price of the asset

- Legal, professional, and agency fees linked to buying or selling the asset

- The cost of improvements (as long as they weren’t deducted as expenses previously)

- Costs directly related to the sale, like advertising or brokers’ fees

For example, if your company sells a piece of machinery, you could deduct the purchase cost, any upgrades (not repairs), and selling costs such as shipping or removal.

How do you determine market value?

If an asset is sold for less than its market value or given away, HMRC requires the use of “open market value” when calculating the gain. This is the price the asset would fetch in an arm’s-length sale between willing parties. For peace of mind — and to avoid future challenges — it's wise to get a professional valuation, especially for property or shares.

What if the asset was acquired before 1982?

Assets acquired before 31 March 1982 use their market value as at that date, rather than the original purchase price. This rule was introduced to simplify things for very old assets where documentation may no longer exist. If you're selling one of these older assets, dig out any available valuations or consider commissioning a retrospective valuation.

Can Business Asset Disposal Relief reduce Corporation Tax?

Who qualifies for this relief?

Here’s a common misunderstanding: Business Asset Disposal Relief (formerly Entrepreneurs’ Relief) does not apply to companies. It only applies to individuals disposing of qualifying business assets — typically sole traders or company shareholders selling shares.

What is the process for claiming?

If you qualify as an individual, you claim the relief on your Self Assessment tax return. There are strict conditions, including owning the shares for at least two years and being an officer or employee of the company.

How much tax can be saved?

When it applies, BADR reduces the Capital Gains Tax rate to 10% on qualifying gains up to a lifetime limit of £1 million. That’s a potential saving of thousands. But again — this relief is not available to limited companies. If your company is disposing of assets, other strategies need to be considered.

Do you pay Corporation Tax on the sale of shares in a subsidiary?

How are share disposals treated for Corporation Tax?

Yes, companies generally pay Corporation Tax on the gain from selling shares. However, if your company sells shares in another company and certain conditions are met, you might be eligible for the Substantial Shareholding Exemption (SSE).

What if the shares are held as a long-term investment?

SSE can apply if:

- Your company held at least 10% of the shares in the subsidiary for at least 12 months in the last 6 years before disposal

- The subsidiary is a trading company or part of a trading group

- Your company is also part of a trading group

If SSE applies, the gain is completely exempt from Corporation Tax. We had a corporate client who disposed of a 15% stake in a joint venture after holding it for 3 years. Because they met all the conditions, they paid no Corporation Tax on the £200,000 gain — a huge win for cash flow.

Are capital gains for companies treated differently than for individuals?

What taxes do companies pay on gains?

Companies pay Corporation Tax on chargeable gains. There’s no separate Capital Gains Tax (CGT) for companies — everything is wrapped into Corporation Tax.

How does individual CGT compare?

Individuals pay Capital Gains Tax separately from Income Tax. They also benefit from an annual CGT exemption (£3,000 for 2025/26). Companies don’t get this allowance. That means even small gains can be fully taxable for a company.

Can group reliefs be applied?

Yes. Within a group of companies, it’s possible to transfer assets and even capital losses between companies. This can be part of a strategic tax planning exercise. But these transfers must meet strict rules and be properly documented.

Can capital losses offset gains from the sale of business assets?

What counts as a capital loss?

If your company sells an asset for less than its allowable base cost, the result is a capital loss. For example, selling a warehouse for £180,000 that cost £210,000 to buy and improve would result in a £30,000 capital loss.

Can losses be carried forward?

Yes. Capital losses can be carried forward indefinitely to offset future capital gains. However, they can’t be used to offset trading income or other profits.

Are there restrictions on offsetting?

Only chargeable gains can be offset with capital losses. And the losses must be reported to HMRC — typically in your company’s tax return — to carry them forward. This is where many companies miss out: they don’t claim the loss in time.

What is indexation allowance, and does it still apply to company asset sales?

When was indexation allowance frozen?

Indexation allowance was frozen for companies from 1 January 2018. Before that date, companies could adjust the cost of an asset to account for inflation.

How does it affect the gain calculation?

If your company acquired an asset before 2018, you can still apply indexation up to December 2017. This increases the base cost of the asset and can reduce your taxable gain. But no inflation allowance applies to assets acquired — or costs incurred — after 2018.

Can it still reduce tax on historic assets?

Yes — but only if the asset was bought before January 2018. For example, a property bought in 2015 and sold in 2025 may still benefit from indexation for the years 2015–2017.

Are intangible assets subject to Corporation Tax on disposal?

How are post-2002 intangible assets taxed?

These are taxed as trading profits under the IFA regime. This includes software licences, trademarks, customer lists, and more. The profit is simply added to your trading profits and taxed as normal.

What about pre-2002 intangible assets?

Assets acquired before 1 April 2002 might still fall under the capital gains regime. This can create planning opportunities — or confusion — depending on how records have been maintained.

Are there any exemptions?

In some cases, intangible assets developed as part of R\&D projects — or held by charities — may be exempt. But the rules are narrow and complex, so always seek specialist advice.

Final Thoughts

Selling a business asset can come with a significant tax bill — but with the right knowledge, it doesn’t have to be a nasty surprise. Planning helps. Good records help even more. And having someone in your corner who understands the UK rules — that helps most of all.

Whether it’s property, shares, or intangible assets, your company will likely pay Corporation Tax on the gain. But there are reliefs, strategies, and timing opportunities you can use to minimise what you owe.

At Cannon Accountants, we’ve seen how a well-timed asset sale or a missed exemption can make a huge financial difference. So if you’re thinking about disposing of a business asset, don’t wait until after the sale. Let’s talk first.

And remember: taxes may be certain, but surprise bills don’t have to be!

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