Business owners wanting to sell their business or shares in their company this financial year should bear in mind potential changes to Entrepreneurs’ Relief pencilled in by the Government.
The Conservative manifesto included a pledge to review and reform Entrepreneurs’ Relief and the announcement today of the next date for the Budget on March 11 will now focus potential sellers’ minds.
Possible changes could come in shortly after the end of the first quarter of this year.
John Baddeley, chairman and corporate solicitor at Wake Smith Solicitors in Sheffield, said: “The Government signalled a review of Entrepreneurs’ Relief in their manifesto. It is currently seen as being too generous and they would like to either restrict it, or get rid of it.
“On that basis if business owners/shareholder directors want to take advantage of the current regime they need to address this in the first quarter of the year. Now we have the budget date we know that it is unlikely that anything will change before then.
“Business owners could be looking at the potential impact of an increased Capital Gains Tax bill if they don’t sell their business pre 5 April 2020.
“Owners planning to exit their businesses should keep a close eye on this, as a successful exit from a business within the current rules might be a once in a lifetime opportunity.
“If the Government increased tax in this area it would be a great shame. We want to encourage entrepreneurs, not discourage them.”
Entrepreneurs’ Relief has played an important role in helping the UK establish its position as global hotspot for entrepreneurs to start and grow businesses in many sectors including in particular fintech and e-commerce.
Entrepreneurs’ Relief reduces the amount of Capital Gains Tax payable when a business or shares are sold. It reduces the rate of tax payable on gains made on disposals to 10 per cent from 20 per cent, subject to strict criteria.
Some commentators have suggested that the new government could reduce the relief to generate more tax, or tighten the rules on qualification for the tax break, which could dis-incentivise bosses from investing in growing their businesses.
For advice on selling a business contact John Baddeley at [email protected] or on 0114 224 2025.
