Both political parties mentioned Entrepreneur’s Relief during the recent election, so it’s likely that the forthcoming Budget will include some changes. If you’re thinking of selling or liquidating your business or business assets, it may be advisable to consider the chance of changes to this relief coming sooner rather than later.
Labour wanted to remove Entrepreneur’s Relief entirely, while the Conservatives proposed ‘review and reform’ but without further detail. It is therefore a specific government proposal, and likely that Sajid Javid will have something to say on the subject when he stands at the despatch box on the 11th March.
Entrepreneur’s Relief was introduced in 2008, and, in its simplest form, allows a business owner to sell shares in their business, make up to £10million and pay just 10% tax. This is instead of 20% capital gains tax that would otherwise apply.
What changes are coming, and when?
There has been NO announcement that there will definitely be a change, nor has there been an announcement of dates from which any change will be effective. Any announcement made as part of the Budget may apply from that date, from the new tax year in April 2020, or it may be deferred until 2021.
The change could be any of the following, or another option entirely:
- Abolish the relief entirely.
- An increase in the applicable tax rate.
- A reduction in the lifetime allowance.
- An increase in the qualifying period.
- Add an age threshold, making this more of a Retirement Relief.
What should you do?
It’s really hard to say, as there is so little detail to work with. At this stage it is purely speculation that the rules will change, but it would be dangerous not to take notice of the warning signs.
It may be worth bringing forward any business sale or disposal, but it may not be possible, and may not be beneficial. It may be worth considering whether to dispose of property or shares before the Budget, but again, we don’t know exactly what the implications will be of waiting until afterwards.
We are very aware that we aren’t able to give any detail on this situation, but based on our experience, it is extremely likely that change is coming. If you are in a position that a change may affect you, it is well worth considering the specifics around your situation before the 11th March 2020. If you would like to discuss this with us, please get in touch.
We will of course be confirming any changes with clients once the Chancellor has spoken on the 11th March, so please check back here to stay up to date.