Implications of selling a business along with the property

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Aldo
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Implications of selling a business along with the property

Post by Aldo »

If the boutique holiday rental you're selling comes with its established good name (various mentions in national newspapers, international magazines and online), with mobile friendly website, furniture and rentals for the next few months and an email-marketing list, what are the tax implications?

- Do you separate the property's value and furniture (assets) from that of the business (its intangible assets) for tax purposes?

- What if you don't pay your taxes in the country the property is in but in another European Union country? I take it that the tax related to the property sale would need to go to the country the property is situated in, but what about the tax on the sale of the business?

- Has anyone sold their holiday let as a business? What was your experience of doing that? Would you recommend it?

- Were there complications with passing on your responsibility towards guests who have booked to your buyer?

- Are there online companies or agencies that help you sell your holiday rental business? I contacted two local real estate agencies but they don't cater to selling businesses. I found one called uk.Businessesforsale.com.uk - has anyone used them?

We're thinking of selling our best selling property in Malta (see property 2 below) because we want to dedicate more time to a new business. If anyone's interested, please get in touch.
JanB
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Post by JanB »

I have recently sold two holiday cottages, separately located. It is a tough one and this is, briefly how I sold in each case.

It is helpful to state that if you sell to someone who wishes to honour your on going bookings, take the website etc, it is vital they buy the place lock stock and barrel as guests have booked on the basis of how it looks when you owned it. It also goes without saying, you have to be sure to notify all bookings to give them the option of continuing with the booking with the new owner. Tricky to time this!

1. Cottage I sold three years ago had almost £10,000 of forward bookings. New owner did not wish to buy all the furnishings etc so I could not let them take on the bookings. Made the right decision as it was a very different cottage when they took it over (not for the better). So, all furniture and effects were sold before we vacated.

2. Cottage I sold a few weeks ago we also agreed to sell website, bookings, all fixtures and fittings, fully equipped as the buyer wanted to continue with letting it for holidays. For tax purposes, we valued the chattels at a separate amount to the property. Our accountant will now work out our capital gain tax liability on the property and the chattels amount will go into a separate audit as we operated a Limited company which we will now wind up having now off loaded all my holiday properties.

I am not sure about the implications of selling abroad, but my main objective was to keep existing guests informed about the changes and it was very smooth in the end.

Most complicated aspect was working out what deposits and balances were due, minus any costs I had incurred with commissions and Paypal percentages etc.

The inventory was fairly extensive, too, down to every last picture!

I did not advertise it as a going concern as I did not want to limit my potential market of buyers - simply got the agent to mention in the brochure the cottage could be available fully equipped by separate negotiation. That seemed to work well and a buyer was found within two days of it going on the market, but the crucial thing was, there were several viewers and not all looking at a holiday let.

Hope this helps.....I am now enjoying a quiet life and particularly Saturdays, which, for the past ten years were changeover days!
"It's a funny old world...." but full of the most amazing people. :-) Sense of humour essential!
AndrewH
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Post by AndrewH »

What incredible properties. I was totally fascinated. As to your questions about the way to sell Property No.2 and how the tax aspect should be dealt with, I wish I had some definite answer, but I fear I haven't. It is an important topic, well for me anyway, because we will be in the same situation a few years down the line.

I would think there will be someone on here who has experienced selling an owners rental business and so could give you some pointers. There must also be agents who specialise in this and their advice would be very useful, I should think.

Just IMO, I would look at it as if selling any other small business, e.g. a retail shop (which I have done). There would be the premises, freehold or leasehold at market value, remembering to add all the fixture to that value; then there would be the moveable assets like furniture, paintings, white goods etc.; no stock of course, but in its place your order book ; finally, the goodwill which obviously has considerable value in your instance. I remember that our accountant juggled the amounts of these component values, but that was only for tax purposes.

PS. Just read JanB's post and realized that I forgot to include your website as part of the sale.
Last edited by AndrewH on Tue Jul 28, 2015 7:46 pm, edited 1 time in total.
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Aldo
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Post by Aldo »

Thank you Andrew and Jan, extremely helpful tips in both your replies.

I like what Jan said about not necessarily advertising it as a going concern so as not to limit the potential market of buyers.
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greenbarn
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Post by greenbarn »

I'm not sure if it would be of any help for where you are, but LMH member Charles Cawley does handle sales of holiday lets and may have some useful tips. Here's one of his LMH posts with information links in his signature. Might be worth a look.
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Aldo
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Post by Aldo »

Thank you Greenbarn. Greatly appreciated.
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Aldo
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Post by Aldo »

I did contact Charles Cawley, Greenbarn. We had a long chat which was very helpful. Very nice guy. Cheers.
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Aldo
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Post by Aldo »

I need to produce a prospectus to present to buyers. Does anyone have an example prospectus I can borrow to see what goes into it apart from the financial side (which the accountant has already provided)? Cheers.
tavi
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Post by tavi »

Janb, can I ask what you did with your ongoing bookings - or rather what did your booked guests do/think/how did they react?

I note in cottage 1 you had 10k of bookings - that means you cancelled them all? and in cottage 2 you sold on the bookings.

Sorry, Aldo I hope I'm not derailing your thread.
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