With uncertainty surrounding the outcome of the general election in May 2015, Baker Tilly’s Corporate Finance Team in Yorkshire are starting to see an increase in business owners concerned that some advantageous tax reliefs currently offered to small businesses in the UK could potentially be scrapped under a new government.
The most obvious of these is Entrepreneur’s Relief. By claiming this when selling all or part of their company, business owners pay less capital gains tax – 10 per cent on qualifying assets, instead of the normal rate of 18 per cent or 28 per cent. Individuals have a lifetime limit of £10m of taxable gain, meaning they will have saved £1.8m if they use their full limit.
Entrepreneur’s Relief is one of the most popular tax breaks in the UK.
However, the National Audit Office recently calculated that the actual cost of this relief in the tax year 2013/14 was £2.9bn – over three times the original estimated cost when it was introduced.
But a potential change in government could see this lucrative tax benefit reduced or scrapped, and so business owners who are considering, or currently selling their business might be wise to consider finalising the transaction ahead of May’s general election.
Paul Johnson, Baker Tilly’s head of corporate finance for Yorkshire & the North-East, said: “Entrepreneur’s Relief is extremely popular with business owners, and it’s not surprising that since it was introduced nearly seven years ago, the take-up of it has been much greater than the government than originally anticipated.
“We’re now getting calls from entrepreneurs concerned that a change in government next year could see the reduction or scrapping of this valuable tax break, and wanting to discuss the impact this could have on the sale of their business.
“We can’t tell whether a new government would continue to support this initiative, but with less than six months to go until the general election, I would encourage business owners in the region to think about the timing of selling their business and to seek professional advice on any commercial or tax considerations.”