Accountants report having seen a “flood” of enquiries from business owners concerned about CGT rises, and seeking to cease trading and cash out. The figures from The Gazette, the official public record for the UK, found 3,126 businesses voluntarily appointed liquidators during the third quarter of 2020, the highest for any third quarter since 2000.

The Chancellor of the Exchequer, Rishi Sunak, cancelled this financial year’s Autumn Budget due to the coronavirus pandemic. Instead, he delivered a Winter Economy Plan on 24 September 2020.

It had been widely anticipated that the Autumn Budget would include some important changes to Capital Gains Tax (CGT), and Business Assets Disposal Relief (BADR), previously called Entrepreneurs’ Relief, amongst others.

The cancellation has provided an opportunity for taxpayers to proactively review their structures and potentially take advantage of current tax rates and reliefs before any changes which may occur in Spring 2021. Not acting could cost you a lot of money.

It is understood that a recent Government review urged a major overhaul of CGT, with the maximum rate of 28% being raised closer to Income Tax rates, with top rates being 40% and 45% in England and Wales.

At the moment, you can claim BADR many times with a cumulative lifetime limit of £1m, decreased from £10m in March 2019.

In November 2020, The Office of Tax Simplification suggested that in order to qualify for BADR, it should be necessary to increase the minimum qualifying shareholding to 25%instead of the current 5%, raise the minimum holding period of the shares or business assets to 10 years from two years, and reintroduce a minimum age limit, possibly linked to the lowest retirement age under pension freedoms (i.e. currently age 55).

What does this mean for business owners looking for a solvent exit?

The amount of tax personally payable by shareholders following a solvent liquidation will increase substantially. Perhaps it is time to move your plans forward so you can ensure shareholders will only pay the current tax rate and before the criteria for BADR are changed.

This is particularly applicable to private sector consultants impacted by the upcoming IR35 changes, with historic limited entities which are no longer needed. 

Our Insolvency & Advisory team at Shaw Gibbs are experts in dealing with winding-up solvent companies.

Contact me for a chat on how we can assist

karyn.jones@shawgibbs.com or 0207 436 4773