The Tory Manifesto promised increased public spending for the NHS and education, and higher investment in the North of England and the Midlands. All this spending will have to be funded. Before Christmas, Sajid Javid mentioned a change to the Treasury rules, necessary to pay for public investment after more than 10 years of austerity.
One of the rule changes may impact upon Entrepreneurs’ Relief. This tax relief is available to taxpayers who sell the whole or part of their business, or when a business asset is sold. Currently the taxpayer only pays a reduced CGT rate of 10% on the first £10m of qualifying gains.
There are two conditions that need to be met in order to qualify for the relief. They are:
The seller must have worked or held office and owned the business for the whole two years immediately leading up to the disposal. The seller could be a sole trader or a partner in a partnership or a shareholder holding at least 5% of the voting shares in a trading company.
If the conditions are fulfilled by the taxpayer, the total potential tax saving is a massive £1m, over a number of disposals given a £10m lifetime limit.
The government has expressed concerns that Entrepreneurs’ Relief has not met its original purpose, resulting in the Treasury losing out on tax receipts.
Shortly after the New Year, Sajid Javid announced the budget date as Wednesday 11 March. If the tax relief was to be withdrawn or amended, this may have a huge impact on the CGT bill for affected tax payers. The timing of the change will be crucial, and it is possible that changes may take immediate effect. There are planning opportunities for those in the process of selling their business, those thinking of selling their business in the near future or indeed those wishing to plan for a later sale.
If you wish to discuss this further and how you could make the best use of your Entrepreneurs’ Relief whilst it still exists, please contact our tax specialist at PK Group, David Truscott on +44 (0)20 8334 9953.