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What would an increase in CGT cost business owners who are looking for exit?

Article

What would an increase in CGT cost business owners who are looking for exit?

13 Aug 2020

1 minute read

The Chancellor has suggested that changes to Capital Gains Tax (CGT) and ER (now known as Business Asset Disposal Relief) would be easy gains for the Treasury, and there is clear evidence that it has been a target for the last couple of years. There is now speculation that the Chancellor will increase CGT in the Autumn Budget to help recoup some of the spending that has been incurred due to the Coronavirus recovery packages.

What would an increase in CGT cost business owners who are looking for exit? - news article image

The 2018/19 Finance Bill contained draft legislation outlining two important changes to Entrepreneurs’ Relief (ER) introduced in the 2018 Budget. There was speculation that ER would be significantly tweaked, or even scrapped, in the March 2020 Budget, but instead the Chancellor reduced the lifetime limit. 

The Chancellor has suggested that changes to Capital Gains Tax (CGT) and ER (now known as Business Asset Disposal Relief) would be easy gains for the Treasury, and there is clear evidence that it has been a target for the last couple of years.

There is now speculation that the Chancellor will increase CGT in the Autumn Budget to help recoup some of the spending that has been incurred due to the Coronavirus recovery packages.

What this means for business owners looking for a solvent exit

The amount of tax personally payable by shareholders as a result of a solvent liquidation will increase if the rate of CGT goes up.

Whilst a solvent liquidation is still likely to remain the most tax efficient method for shareholders to extract funds from a limited company, it may cost them more if they wait until after the Budget.

Therefore, we are urging those who are considering a solvent liquidation to take action now, in order to take advantage of the current tax rate. This is particularly applicable to private sector consultants impacted by the upcoming IR35 changes, with historic limited entities which are no longer needed. 

Contact me for an informal discussion on how we can support you. via karyn.jones@shawgibbs.com or 0207 436 4773

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