New chancellor Rishi Sunak has announced he is keeping to the March 11 budget date.
There has been speculation in the run up to the election and since then that the Government is looking to target entrepreneur’s relief, the perception being that only the very rich benefit from the scheme. Boris Johnson said it makes them “staggeringly rich” and, if the relief were removed it has been estimated it would provide an additional £2.4bn of tax receipts.
Entrepreneur’s relief was introduced by Gordon Brown in 2008 and is a relief that allows some business owners to pay a reduced amount of capital gains tax when they dispose of their business through sale or winding up. They achieve a lower rate of 10% rather than the usual rate of 20% on up to £10m of gains.
There has been uproar from many regarding the potential withdrawal of the relief. Hardworking individuals have spent their business lives planning their future on the basis the relief exists, investing in the business on the assumption they would get it back, or investing money into the business rather than a pension “my business is my pension”. The risk now is that the rug will be pulled from underneath their feet.
So, what might happen?
Qualifying periods for eligibility were increased last year but it is predicted more direct attacks may be announced in the budget;
• The lifetime limit may be reduced back down to previous levels of £1m or £2m from the current £10m limit.
• A maximum age limit to qualify (say 55 or 60) could be imposed.
• The allowance may be removed altogether for solvent liquidations.
• New rules may only come in for new start-ups or newly acquired companies.
If you feel you may be affected and want to better understand your position, please speak to your contact partner.