11 March 2020

New entrepreneurs relief rules apply to disposals on or after today

In his 2020 budget announcement, Chancellor Rishi Sunak said he wouldn't “fully abolish” Entrepreneurs’ Relief – a £3bn relief for small business owners. But he would reduce the lifetime limit from £10million to £1million. In an article produced by Nasim Sharf earlier this year, he predicted this move and offered some sound advice…

Entrepreneurs relief (ER) is a valuable relief from capital gains tax (CGT), which can result in those selling their companies paying CGT at 10 per cent. Compare that to the current rate of 20 per cent if ER is not available.

But what is the future for ER? We wait to see! The Conservative Party’s 2019 General Election manifesto promised to ‘review and reform entrepreneurs’ relief’ and there is much speculation about what this entails.

When will the changes be made? There is a good chance that changes will be announced in the Budget and they may take effect immediately.

If change is to be made, then ER may be reformed by lowering the lifetime allowance from £10m. Currently, an individual can make £10m of gains that stand a chance of qualifying for ER and it would be easy for the government to lower that figure to, for example, £1m – £1m being the limit when ER was introduced in 2008.Lif

As change is likely, one thing that we can all safely predict is the number of unsolicited emails that will be hitting our inboxes, promising risk-free steps that can be taken to ‘beat the taxman’ and secure ER ahead of any changes. A word of warning - be cautious of dealing with anyone you do not know or who has not been introduced via a trusted adviser.

Of course, there may be steps that can be taken now to ‘bank’ ER, but they require detailed consideration of all circumstances and risks and in order not to be a sham or otherwise fall short, there must be real transactions that are properly implemented.

Wilkin Chapman has a track record of working alongside existing accountants and tax advisers to help with sales of companies, including strategies on sale and tax. For more advice please contact Partner Nasim Sharf on 01482 398393 or email: Nasim.sharf@wilkinchapman.co.uk

Nasim Sharf, Wilkin Chapman LLP
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