Everything directors need to know right now
It has always survived so far but this time it might finally be the end of the road for the advantage.
In his first budget on March 11th 2020, the Chancellor Rishi Sunak took a middle path on entrepreneurs’ tax relief looking “to reform rather than abolish it.”
He reduced the lifetime limit for relief on Capital Gains Tax from £10m to £1m which he estimated would only affect 20% of small UK businesses.
He pledged that the funds would be spent on business tax relief for investing in buildings, employment, research and development.
But this was a different time – BC – Before Covid-19, so many calculations and assumptions have changed in the meantime.
With huge deficits being run up to provide some shelter from the Coronavirus pandemic storm, the Chancellor will be looking at low-hanging fruit that can be picked to help reduce it before he considers tougher decisions such as raising taxes.
One clue as to what could happen to entrepreneurs’ relief in the forthcoming Autumn/Winter spending review came in a request from the Treasury to the Office of Tax Simplification (OTS) to launch a call for evidence in a Capital Gains Tax (CGT) review including an online survey.
The aim is to hear from taxpayers and their advisers about which areas of CGT are complex, hard to abide by and where improvements could be made.
The deadline for detailed comments on the technical detail and practical operation of CGT is on October 12th 2020 which would give the government time to include any changes in the sending review or budget.
The online survey aspect is a novel approach to evidence gathering and starts with a quiz asking various questions about individual experiences in dealing with CGT including the type of asset disposed of, awareness of reliefs and the use of an adviser in reporting disposals.
You can take the online questionnaire by clicking here or can submit evidence directly by email to email@example.com
The review specifically mentions that it will be looking at disposals from wound-up and liquidated businesses which by implication and deduction means that Entrepreneurs Relief is in the firing line.
Owners and directors of solvent businesses that wind them up through a Members Voluntary Liquidation process are able to take advantage of a lower CGT rate through the entrepreneurs relief – but this might be on borrowed time.
If you’re planning to close your company and enjoy the fruits of your efforts over the years then you should get in touch with us.
We can discuss what the most efficient methods of closing and disbursing your assets would be while you’re still able to make use of these advantageous rules.