Entrepreneurs’ relief… The end of the road?
Within their December manifesto the Conservative Party recognised that “some tax measures haven’t fully delivered on their objectives”, commenting that “we will review and reform Entrepreneurs’ relief”.
Currently, Entrepreneurs’ Relief enables an eligible business owner to “sell up” and qualify for a reduced rate of capital gains tax (10%) as compared to the standard rate (20%) on up to £10 million of lifetime gains.
The problem, however, is that this tax relief costs the Exchequer over £2 billion annually and with the Tories promising not to raise the rate of income tax, VAT or National Insurance, it’s not surprising that many expect cuts to Entrepreneurs’ Relief within Rishi Sunak’s first Budget Speech set for 11 March 2020.
Many commentators argue that the relief is too generous, overly rewarding those who are rich. Others observe that there’s little or no evidence that the relief encourages people to be entrepreneurs who wouldn’t otherwise become entrepreneurs.
Entrepreneurs’ relief…so what next?
We would be very surprised if this popular, well established relief were to be eliminated in the Budget but we do expect its scope to be reduced. A reduction in the “lifetime allowance” from £10 million to (say) £1 million wouldn’t surprise us…after all we’re now only allowed £1 million tax free in our pension pots these days. Such an option would protect the smaller businesses many of whom have been planning their retirement with the relief in mind.
What to do?
It would be sensible to assume that any change which might be coming would take effect in March 2020, leaving very little time to take preventative action. Crystallising a CGT event prior to Budget Day may for some be well worth considering. Various possibilities exist in terms of what is appropriate and practical depending on the assets concerned.
If you’d like a conversation on what might work in your own circumstances, please speak with your usual Kreston Reeves contact or else enquire here.
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