With the up-coming pre election budget, one of the topics that has got a lot of business owners, accountants and anyone involved in M&A work buzzing is what will happen to entrepreneurs’ relief. The relief can offer significant tax savings (an effective 10% rate of CGT) when selling shares up to a lifetime allowance of £10million.
Entrepreneurs’ Relief is hardly the biggest in terms of “tax take” but there is a political angle in that it is viewed as a relief that benefits the so-called rich. There is no doubt that the relief helped to stimulate an otherwise difficult market for business sales during the recession but transaction volumes are now back at pre crunch levels. Taking it away would undoubtedly cause more than a ripple with business owner exit (and retirement) plans significantly affected. HMRC stats show that the relief is also costing the government much more than originally anticipated.
Certain restrictions around incorporations and other connected party transactions were announced in the pre-budget statement in December with immediate effect but is that going to be it? Removing it entirely is very unlikely (we have had something similar for business assets since 1998) but there could be further tightening.
I personally think that if changes are going to happen they will be a post election. I also strongly believe that entrepreneurs’ relief encourages what any government should strive for – individuals striving to create valuable private sector companies with a considerable by product in terms of employment opportunities.