Do Companies Pay Capital Gains Tax or Corporation Tax on Assets

At Towerstone, we provide specialist capital gains accountancy services for company owners selling assets. We have written this article to explain which tax applies and why, helping you make informed decisions.

This is a question I am asked regularly by company directors, business owners, and even people who have run limited companies for years. In my opinion it is one of those areas where the terminology causes more confusion than the rules themselves. From experience many people assume companies pay Capital Gains Tax in the same way individuals do. They then plan around the wrong tax entirely and only realise later that the numbers do not add up.

The short answer is simple. Companies do not pay Capital Gains Tax. Companies pay Corporation Tax on gains arising from the disposal of assets. However, as with most things in tax, the detail behind that sentence matters a great deal.

In this article I am going to explain clearly how companies are taxed when they sell or dispose of assets, why Capital Gains Tax does not apply to companies, how Corporation Tax replaces it, and how this affects real world situations such as selling property, shares, crypto, equipment, or business assets. I will also share practical insight from experience about where companies commonly go wrong and how to think about asset disposals properly from a company tax perspective.

The Fundamental Difference Between Individuals and Companies

The starting point is understanding that individuals and companies sit in completely different tax regimes.

Individuals are subject to:

Income Tax

Capital Gains Tax

Companies are subject to:

Corporation Tax

Companies do not have Capital Gains Tax allowances, Capital Gains Tax rates, or Capital Gains Tax reporting rules. Instead gains made by companies are folded into their Corporation Tax computation.

From experience this distinction is often missed because people talk casually about gains without specifying which tax system they are in.

In my opinion once you accept that companies live entirely within the Corporation Tax world, everything else becomes much clearer.

Why Companies Do Not Pay Capital Gains Tax

Capital Gains Tax is designed for individuals and certain trusts. It reflects personal allowances, income bands, and personal circumstances.

Companies do not have personal allowances. They are artificial legal entities designed to make profits, and HMRC taxes those profits through Corporation Tax.

From experience HMRC’s approach is deliberately consistent. All company profits, whether they arise from trading, investing, or selling assets, are brought together and taxed under Corporation Tax.

This includes profits that an individual would call capital gains.

How Asset Sales Are Taxed in a Company

When a company sells or disposes of an asset, the resulting profit or loss is included in the company’s Corporation Tax calculation.

This applies to:

Property

Shares

Cryptoassets

Equipment and machinery

Intellectual property

Land

Investments

Business assets

There is no separate Capital Gains Tax calculation. The gain is calculated using Corporation Tax rules and taxed at the prevailing Corporation Tax rate.

From experience this often surprises directors who expect a special rate or allowance to apply.

How a Company Calculates a Gain on an Asset

Although the tax is Corporation Tax, the way the gain is calculated will feel familiar to anyone who understands Capital Gains Tax.

In broad terms the company calculates:

Disposal proceeds

Less allowable costs

Resulting profit or loss

Allowable costs usually include:

Purchase cost

Certain acquisition costs

Enhancement costs

Disposal costs

However there are important differences from personal Capital Gains Tax, especially around reliefs and indexation.

Indexation Allowance for Companies

Historically companies benefited from indexation allowance, which adjusted the cost of assets for inflation.

Indexation allowance was frozen and then effectively abolished for disposals after December 2017.

From experience this is still relevant because:

Older assets may still carry indexation

Directors sometimes expect inflation relief that no longer applies

In my opinion relying on outdated indexation assumptions is a common error.

No Annual Exempt Amount for Companies

One of the biggest differences from personal Capital Gains Tax is that companies do not have an annual exempt amount.

Individuals can make gains up to a certain threshold each year without paying Capital Gains Tax. Companies do not have this benefit.

From experience this means:

Every taxable gain matters

Small disposals still create tax

Timing strategies used by individuals often do not work for companies

In my opinion this is one reason why asset planning within companies needs to be done more deliberately.

Corporation Tax Rates Apply to Gains

Gains made by companies are taxed at Corporation Tax rates.

These rates depend on:

The accounting period

The company’s level of profits

Whether marginal relief applies

From experience directors sometimes assume gains are taxed at a flat rate. In reality the gain simply increases total taxable profits and may push the company into a higher effective rate.

Selling Property in a Company

Property is one of the most common assets held in companies and one of the most misunderstood from a tax perspective.

When a company sells a property:

Any profit is subject to Corporation Tax

Capital Gains Tax does not apply

No annual exemption is available

Corporation Tax rates apply

From experience this often comes as a shock to directors who are used to personal property rules, especially the main residence exemption which does not exist for companies.

In my opinion property gains inside companies need to be modelled carefully before sale.

Selling Shares or Investments in a Company

If a company sells shares or other investments, any profit is again subject to Corporation Tax.

However there may be reliefs available depending on the nature of the investment.

From experience one important relief is the substantial shareholding exemption, which can exempt certain gains on the sale of shares in trading companies.

This relief is complex and depends on conditions such as:

Level of shareholding

Length of ownership

Trading status of the companies involved

In my opinion this is an area where advance advice is essential because the difference between taxable and exempt can be significant.

Cryptoassets Held by a Company

Cryptoassets held by a company are treated as assets for Corporation Tax purposes.

When a company disposes of crypto, including:

Selling for fiat

Swapping one cryptoasset for another

Using crypto to pay suppliers

A taxable profit or loss arises and is included in the Corporation Tax computation.

From experience directors often mistakenly assume crypto is subject to Capital Gains Tax rules. It is not. It is always Corporation Tax for companies.

Equipment and Fixed Assets

When a company sells equipment or fixed assets, the tax treatment can involve both gains and capital allowances.

From experience this is an area of confusion.

Instead of Capital Gains Tax, companies apply:

Capital allowances rules

Balancing charges or allowances

If an asset is sold for more than its tax written down value, a balancing charge may arise and increase taxable profits.

If sold for less, a balancing allowance may reduce profits.

In my opinion this reinforces the point that companies operate under a completely different framework from individuals.

Intangible Assets and Goodwill

Intangible assets such as goodwill, software, and intellectual property have their own Corporation Tax rules.

Gains and losses on these assets are generally taxed as part of Corporation Tax, but the detailed treatment depends on when the asset was acquired and how it is classified.

From experience goodwill is particularly sensitive, especially around incorporations and business sales.

Gifts and Transfers by a Company

Companies do not make gifts in the same way individuals do.

If a company transfers an asset for less than market value, HMRC will usually treat the transaction as taking place at market value for tax purposes.

This means:

A gain may arise

Corporation Tax may be due

Director or shareholder tax issues may also arise

From experience these transactions often create multiple layers of tax.

Losses on Asset Disposals in a Company

Losses on asset disposals can be valuable for companies.

From experience:

Capital losses can usually be offset against capital gains

Some losses may be offset against other profits depending on circumstances

However losses must be calculated and claimed correctly.

In my opinion failing to record and use losses properly is a missed opportunity for many companies.

Reporting Gains in Company Accounts and Tax Returns

Companies report gains through their accounts and Corporation Tax returns.

From experience this involves:

Recognising the disposal in the accounts

Calculating the tax effect

Including it in the Corporation Tax computation

Paying Corporation Tax by the relevant deadline

There is no separate Capital Gains Tax return for companies.

Common Mistakes I See in Practice

Over the years I have seen the same misunderstandings repeatedly.

These include:

Referring to Capital Gains Tax in company contexts

Applying personal allowances to companies

Missing Corporation Tax on asset disposals

Using the wrong rates

Ignoring capital allowances

Failing to consider reliefs

Mixing personal and company assets

In my opinion most of these mistakes come from directors applying personal tax logic to company situations.

Why the Language Matters

I often tell clients that using the right language matters because it shapes how you think about tax.

If you think in terms of Capital Gains Tax when dealing with a company, you are already in the wrong framework.

From experience once directors switch to thinking purely in Corporation Tax terms, decisions become clearer and planning improves.

Planning Asset Sales in a Company

Good planning around asset sales involves:

Understanding the Corporation Tax impact

Considering timing within accounting periods

Modelling cash flow for tax payments

Reviewing reliefs

Considering extraction strategies for shareholders

In my opinion asset sales should never be looked at in isolation from the wider company and personal tax position.

Interaction With Shareholder Tax

Although companies pay Corporation Tax on gains, shareholders are taxed separately when profits are extracted.

This can involve:

Dividends

Salaries

Liquidation distributions

From experience the combined tax burden is often more important than the company level tax alone.

What I Usually Explain to Directors

When directors ask me whether their company pays Capital Gains Tax, my answer is always the same.

No, your company pays Corporation Tax on gains, and that difference matters.

From experience this one clarification often changes how directors think about holding assets inside a company versus personally.

My Practical Advice From Experience

Based on years of advising companies, my advice is:

Stop thinking in Capital Gains Tax terms for companies

Treat all profits as Corporation Tax profits

Get advice before selling significant assets

Consider reliefs early

Model the full tax impact, not just the headline rate

In my opinion a short conversation before a disposal can save a large and unexpected tax bill later.

Key Takeaways

So do companies pay Capital Gains Tax or Corporation Tax on assets.

Companies pay Corporation Tax. Always.

Gains made by companies are taxed within the Corporation Tax regime, without personal allowances and often without the reliefs individuals expect.

From experience the biggest mistakes happen when directors assume company tax works like personal tax. It does not.

If there is one message I would leave you with it is this. When a company sells an asset, think Corporation Tax from the very beginning. Doing so puts you on the right footing, avoids costly misunderstandings, and allows you to plan properly rather than react after the event.

If you would like to explore related Capital Gains Tax guidance, you may find Do I have to pay Capital Gains Tax on inherited property and Do I need an accountant to calculate my capital gains useful. For broader Capital Gains Tax guidance, visit our Capital Gains Tax hub.