14 February 2020
The Government is set to scale back a tax break for entrepreneurs in the budget in March.
In the lead up to the most recent general election, the Conservative Party’s manifesto promised to ‘review and reform’ Entrepreneurs’ Relief (ER), with the implication that it has not fully delivered on its objectives.
You may be aware that ER provides a beneficial capital gains tax rate on the disposal of qualifying business assets. This includes the sale of an unincorporated business and the disposal of shares in a company in which the individual has held at least 5% of the issued ordinary share capital and voting rights. There are various conditions to be met, including (but not limited to) a minimum period of ownership of two years.
If a capital disposal qualifies for ER, an individual can currently sell his / her business and pay a capital gains tax rate of 10% on lifetime gains of up to £10 million, as opposed to the normal rate of 20%. This provides a potential tax saving of up to £1 million during an individual’s lifetime.
The Chancellor, Rishi Sunak, will deliver his first Budget on 11 March 2020, and there has been a lot of media attention and speculation that a significant reform of ER will be announced, which could potentially lead to the complete abolition of the relief.
It is, of course, possible that the Government may consult on any proposed changes before they are implemented. But there is also the possibility that any changes could be introduced from the date of the Budget, or that anti-forestalling measures could effectively prevent taxpayers from taking protective action.
We cannot predict what will be announced in the next Budget, but we would like all of our clients to be aware of the potential changes to this valuable relief. We would be very pleased to meet with you if you are considering a sales process within the next couple of years so we can discuss ways in which the availability of ER may be ’banked’ prior to 11 March in the event that any changes take immediate effect.
For more information please do not hesitate to contact Helen Cowley on either 0161 236 6936 or via email h.cowley@uhy-uk.com
