Capital Gains on Company Assets: UK Tax Overview

If you’re running a company in the UK and thinking about selling a property, some valuable machinery, or even a portfolio of shares, it’s natural to wonder – “Do companies pay capital gains tax?”

Understanding how the profit from selling company assets is taxed can be confusing, especially since the rules are quite different for businesses compared to individuals. It’s a crucial area to get right – because the last thing any business owner wants is an unexpected tax bill.

Whether you’re preparing for a big asset sale or just want to understand your responsibilities, this guide breaks down everything you need to know about capital gains relating to company assets (sometimes called “corporate gains tax” or “company capital gains tax”) in England. We’ll explain how capital gains are taxed for companies, how this differs from personal capital gains tax, what reliefs might be available, and the practical steps business owners can take to stay compliant.

Let’s get started by clearing up a common misconception – and then step through how chargeable gains on company assets actually work in practice.

Do Companies Pay Capital Gains Tax in the UK?

The short answer: Companies do not pay capital gains tax (CGT) in the way individuals do. Instead, when a company disposes of an asset and makes a profit, that gain is treated as a “chargeable gain” and taxed as part of the company’s overall profits – subject to corporation tax.

Let’s look at what this means in practical terms:

• Individuals pay Capital Gains Tax (CGT) on profits from selling personal capital assets like property, shares, or valuable possessions.
• Companies, on the other hand, calculate their profit from selling or disposing of capital assets, but instead of a separate CGT bill, these gains are folded into the company’s total taxable profits for the year.
• HMRC then charges corporation tax on this total profit (including the chargeable gain and normal trading income), at the current corporation tax rate.

This approach is sometimes confused with the term “corporate gains tax” or “CGT for companies”, but technically, there’s no distinct CGT regime for businesses. Everything falls under corporation tax.

What Counts as a Chargeable Gain for a Company?

A “chargeable gain” is the taxable profit a company makes from selling or otherwise disposing of a capital asset. Here’s how it typically works:

• You own a business asset (let’s say an office building, vehicle, intellectual property, or shares).
• You sell the asset for more than its original purchase price (taking into account certain eligible costs and depreciation).
• The difference between the sale proceeds and the allowable costs is your chargeable gain.

This chargeable gain is then included with the company’s other income to arrive at the total taxable profits for the year. This bundled amount is what corporation tax is applied to.

Typical Examples of Chargeable Assets

• Land or buildings used for business operations
• Machinery and equipment
• Company vehicles
• Investments, such as shares in other companies (with some exclusions for trading subsidiaries)
• Intellectual property (e.g., patents, trademarks) in some cases

In many real-world situations, companies may sell a property after relocating, dispose of unused machinery, or offload investments as part of business strategy. In all these cases, the gains made are classed as chargeable gains – and are subject to corporation tax, not personal capital gains tax.

How Are Corporate Asset Gains Calculated?

The general steps to calculating a company’s chargeable gain look like this:

1. Determine the disposal proceeds – usually the amount received from the sale.
2. Deduct the allowable costs – the asset’s purchase price, legal fees, and costs of improvements (but not repairs or routine maintenance).
3. Apply any qualifying indexation allowance for assets acquired before December 2017 (more below).
4. The resulting figure is your chargeable gain – added to the company’s other profits to calculate the total taxable profits for the year.

HMRC provides detailed guidance on the specific costs allowed, as well as how to handle part disposals or more complex scenarios. It’s important to keep good records of all related costs, as these can significantly reduce your tax liability.

What About the Indexation Allowance?

For assets acquired by companies before December 2017, an additional indexation allowance can be claimed. This is designed to account for inflation between the date the asset was acquired and December 2017, effectively reducing the chargeable gain by adjusting for the impact of inflation.

However, for assets purchased after December 2017, indexation allowance has been frozen, so no further relief is available from that date onward. It’s still a benefit for long-held assets, so be sure to check your acquisition timing if this could apply.

Are There Other Reliefs and Allowances Available?

Yes, there are some tax reliefs and deferral options for companies disposing of assets. The main reliefs to consider include:

• Rollover Relief: If your company sells a business asset and replaces it with a new one, you may be able to “roll over” or defer the gain. The gain is essentially deducted from the cost of the new asset, postponing the point at which the gain becomes subject to tax. This can be a useful option if you’re re-investing in new premises, machinery, or qualifying intangible fixed assets. See HMRC’s rules on Rollover Relief for more detail.
• Holdover Relief: Available in certain cases if a business asset is gifted rather than sold, particularly between companies within a group.
• Substantial Shareholding Exemption (SSE): If your company sells shares in another trading company (and certain conditions are met – holding at least 10% of shares for a minimum period), the gain may be exempt from tax altogether.
• Group Relief: Capital losses of one company may be transferred within a corporate group to offset gains of another, potentially reducing the overall tax bill.

Understanding which reliefs may apply is a key part of good tax planning. Professional support can help ensure you’re making the most of any relevant allowances.

How Is the Capital Gain Taxed? – The Role of Corporation Tax

The most important practical point for business owners is this: all company profits – including those from capital gains – are taxed at the corporation tax rate. There is no separate “company capital gains tax”.

As of April 2023, the main corporation tax rate in the UK is 25% (with a reduced rate for smaller companies with profits under £50,000). This rate covers all profit, whether from trading, investing, or asset sales.

So, if your business sells a piece of equipment for a profit, the gain is added to your other income sources – like sales revenue and investment income – and the total figure is taxed at the prevailing corporation tax rate. This keeps things relatively simple from an administrative perspective, but means your gains don’t benefit from the lower CGT rates offered to individuals.

How Does This Compare with Individuals?

For individuals (sole traders, partnerships, or personal investors), capital gains tax is a separate tax regime with its own rates, allowances, and exemptions. For instance:

• Individuals benefit from the annual CGT allowance (currently £6,000 for 2023/24) and pay CGT at 10% or 20% (depending on total taxable income and asset type).
• The personal CGT regime also offers reliefs like business asset disposal relief (formerly entrepreneurs’ relief), which can further reduce the tax rate for qualifying disposals.
• On the other hand, companies pay corporation tax on all profits, including capital gains, at one rate (with possible reliefs only for specific cases, as discussed above). Companies do not get an annual CGT allowance as individuals do.

This difference is crucial to remember if you’re deciding on a business structure, such as whether to operate as a sole trader, partnership or company. If you’re not sure what structure is right for your business goals and exit plans, our guide on Sole Trader vs Company breaks down the pros and cons further.

Practical Example: How Capital Gains Work for a Company

Let’s say your company sells a delivery van. You originally bought it for £20,000. After five years, you sell it for £11,000. In this scenario:

• If you’ve claimed capital allowances during ownership, those must be taken into account in the calculations.
• Assuming all allowable deductions and no remaining capital allowances to consider, your “chargeable gain” is the difference between sale price and adjusted cost.

If instead, your company sells off a shop building for £250,000 that it bought 10 years ago for £100,000 (after factoring in improvement costs and any applicable indexation), the chargeable gain would be substantial and would directly affect your company’s tax bill for that year.

Even if your business is not explicitly trading in property or assets, unwanted company assets sold at a profit still count as chargeable gains. If you’re not sure whether something counts, or how to work out the right figures, that’s a good point to seek specific advice.

FAQs: Capital Gains Tax for UK Companies

Do companies pay capital gains tax (CGT)?

No. UK companies do not pay a separate capital gains tax. Any profit on the sale or disposal of capital assets is taxable as a “chargeable gain” and added to taxable profits. The company pays corporation tax on this total – not a distinct CGT rate or regime.

Is there such a thing as “company capital gains tax” or “CGT for limited companies”?

The phrase crops up often but is a misnomer. Companies do not pay CGT as defined for individuals. For tax purposes, everything is swept into corporation tax. See our detailed overview on business structures and their tax implications here.

What assets are subject to chargeable gains for companies?

Generally, all assets a company owns for business purposes – including land and property, machinery, vehicles, intellectual property, and shares (subject to the substantial shareholding exemption in some share sales).

Can a company offset capital losses against capital gains?

Yes. Companies can offset capital losses from one asset disposal against chargeable gains from others in the same accounting period. Losses can sometimes be carried forward to future years, but not usually carried back.

Do I need to report asset gains separately in my tax return?

You do need to itemise all disposals and capital gains within your company tax return. The gains are not reported on a separate CGT form, but are a required part of corporation tax filing. Good record-keeping is essential. For more information, see filing accounts and reporting requirements.

Are there any tax planning opportunities for companies with capital gains?

Depending on your plans, various reliefs (like rollover relief) and group offset opportunities can improve your tax position. Speak to your accountant or a legal advisor before making major asset disposals or business sales. Our sale checklist can also help you prepare for a smooth transaction.

Key Takeaways

• UK companies do not pay capital gains tax (CGT) as individuals do. All profits, including those from selling assets, are taxed through corporation tax.
• Any gain from selling or disposing of a capital asset is a chargeable gain and is included in the company’s overall taxable profits for the year.
• Corporation tax is payable on the total profits (trading + capital gains) at the relevant rate, with no separate CGT allowances for companies.
• Companies may be able to access reliefs (like rollover relief or substantial shareholding exemption) to defer or reduce their tax on gains.
• Good record keeping and careful planning are crucial for accurately calculating and reporting asset disposals.
• If you’re unsure how your company’s assets sales will be taxed, or how to structure major transactions, it’s wise to seek tailored legal advice for your business.

Need Help With Company Asset Sales or Tax Planning?

Setting up robust legal and tax foundations for your business is just as important as any other part of your strategy. If you’d like professional support on your business structure, tax obligations, or help preparing the right legal documents for selling business assets, Sprintlaw can help.

For a friendly, free, no-obligation chat about your company’s legal and compliance needs, get in touch with our team at team@sprintlaw.co.uk or call 08081347754. We’re here to help your business stay protected and compliant – from day one and as you grow.