Understanding the Basics of Small Business CGT 90
As a small business owner, it’s important to understand the various taxes that your business may be subject to. One such tax is CGT 90, which stands for Capital Gains Tax on assets used in a business that was operational for less than 90 months. This tax can be a significant burden for small businesses, but understanding the basics can help you navigate it more effectively.
What is CGT 90?
CGT 90 is a tax on the profits made when a business sells or disposes of an asset that was used in the course of the business. This tax only applies to assets that were owned by the business for less than 90 months, or seven and a half years. The tax is based on the increase in the asset’s value during the time it was owned by the business.
Why is CGT 90 important for small businesses?
Small businesses may be particularly affected by CGT 90 because they often rely heavily on assets such as machinery, equipment, and vehicles. These assets depreciate quickly, meaning that their value decreases over time. When a business sells or disposes of these assets, their original purchase price may not reflect their true value at the time of sale. This can result in a large capital gain, which is subject to tax under CGT 90.
How is CGT 90 calculated?
The calculation of CGT 90 can be complex, but it generally involves subtracting the original cost of the asset from the sale price or disposal value. The resulting capital gain is then subject to tax at the current CGT rate, which is currently 20% for most businesses.
How can small businesses reduce the impact of CGT 90?
There are several strategies that small businesses can employ to reduce the impact of CGT 90. One option is to time the sale or disposal of assets strategically, taking into account the 90-month threshold. Another option is to structure the business in a way that minimizes the impact of CGT 90, such as by using a trust or partnership structure.
In conclusion, understanding the basics of CGT 90 is an important part of managing a small business. By knowing how the tax works and how it can be mitigated, small businesses can better plan for the future and avoid unnecessary financial burdens. As always, seeking advice from a qualified tax professional is recommended when dealing with complex tax issues.
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