Businesses push to be sold before Entrepreneurs’ Relief changes

Entrepreneurs’ Relief, which costs Treasury £3bn a year, could be cut back in as early in February in Budget

Business owners are accelerating plans to sell their businesses before Entrepreneurs’ Relief changes as early as February, say accountants.

In the run-up to the election, the Conservatives pledged to “review and reform” Entrepreneurs’ Relief. Since then business owners who were already planning to sell have been under the gun to complete.

Entrepreneurs’ Relief reduces the amount of capital gains tax payable from 20 per cent to 10 per cent.

Commentators have warned that Entrepreneurs’ Relief changes could mean cutbacks to generate more tax or tightening up the rules as to who qualifies for the tax break.

The changes could come as early as February 2020 in the next Budget.

During the election, Labour’s policy was to scrap Entrepreneurs’ Relief completely.

Stuart Crook, partner at accountancy firm Wellers, said: “The uncertainty we are seeing at the moment is causing genuine entrepreneurs to look at accelerating the sale of their businesses to ensure they qualify for the relief, often at reduced prices in order to facilitate it.”

Sue Lucas, partner at business advisors and accountants Moore, said: “Clients who were planning to exit their businesses have been rushing to get those deals done. For entrepreneurs the successful exit from a business might be a once-in-a-lifetime opportunity.”

“It would be a real shame if the government increased tax in this area – we want to encourage entrepreneurs not disincentives them.”

In October the Institute for Fiscal Studies criticised Entrepreneurs’ Relief for just rewarding owners already selling their businesses, rather than encouraging them to reinvest in another start-up.

Labour chancellor Alistair Darling introduced the relief partly to encourage entrepreneurs to start companies.

The IFS said: “If one of the aims of reduced capital gains tax rates on business assets is to incentivise individuals to invest more in their businesses, this evidence suggests they are not working.”

>See also: Entrepreneurs’ relief facing increasing calls to be scrapped

The Association of Accounting Technicians (AAT) went further, calling for Entrepreneurs’ Relief to be scrapped and that the £3bn or so the relief costs the Treasury to be invested directly in helping small business start-ups and scale-ups.

Crook said: “There are some who don’t like entrepreneurs’ relief because there are a small group of people who get it when it doesn’t seem deserved.

“However, for those who have worked hard to employ people over long periods of time or increase the values of their businesses, it is still an attractive option.

Further reading on Entrepreneurs’ Relief

British entrepreneurs have made over £108bn from business sales over past 5 years


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