What is an asset disposal?

 

The disposal of assets refers to the sale and replacement of the economic resources and capital of a business, including property, plant and equipment. When the assets of your business are no longer efficient or suitable, you will need to make a commercial decision on how to dispose of them.

The method you adopt, and the treatment of it in the business’s accounts, can have significant financial and tax implications. You will need to understand how to factor the disposal into your accounts and reports.

Visit our commercial law pages for more commercial information.

Maximising cost-effectiveness

A commercial lawyer can advise you on how to manage your business to make the most effective use of timely and efficient asset disposals. All businesses, regardless of their size, should have in place policies governing monitoring and replacement of the business’s core assets.

Failure to do so can mean disposing of assets in a less cost-effective manner. The usual problem for businesses is disposing of the asset too late, achieving too low a price for them, or failing to take advantage of tax breaks. A commercial solicitor can sit down with management and draft appropriate policies to ensure that clear rules and processes are set down.

To arrange a referral to a commercial solicitor, call us on 0800 1777 162.

Getting the best deal

Valuation is another important aspect of asset disposal. It is essential to use a competent valuer with experience with similar types of assets. Only by having a proper valuation can you factor into your accounts the amount expected to be gained from the asset disposal.

You should also consider the tax implications. Not doing so can lead to accidentally negating much of your gains. The main one to be aware of is the business’s liability for capital gains tax. This is levied on the profit gained from the increase in value of an asset.

Capital gains tax liability can be quite substantial and it is important to heed a commercial solicitor’s legal advice as to the most appropriate time to dispose of an asset in order to minimise your business’s capital gains tax liability.

Taxation can be complicated, visit our tax law pages for information on getting the best advice.

Disposal options

There are a few options for how to dispose of an asset. The most common methods are:

  • Private treaty, in which the business approaches a buyer and invites them to make an offer
  • Negotiated sale, in which the business is approached by a buyer and a price is negotiated between them
  • Public auction, in which the sale is announced publically and bids are solicited

Speak to a commercial lawyer about which is the most appropriate method for your asset type. This choice will also depend on the amount of time you have to efficiently dispose of the asset.

If you would like to obtain legal advice on asset disposals, Contact Law can put you in touch with a local specialist commercial solicitor free of charge. Please call us on 0800 1777 162 or complete the web-form above to speak to an advisor.

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