Shropshire entrepreneurs must familiarise themselves with tougher tax relief rules after the Government announced a stronger stance, according to our Tax Director, Francesca Hutcheson.
Francesca said business owners would need to review their position to avoid falling foul of the new rules.
“Before the recent Budget, there were rumours that the Chancellor Philip Hammond would scrap Entrepreneur’s Relief and remove the 10% rate of Capital Gains Tax for any business disposals that met the right criteria.
“And while he didn’t go so far as to abolish this valuable relief, he did take steps to tighten the conditions which business owners need to meet, and to tackle possible abuse of the Capital Gains Tax system.”
Francesca said from April 2019, the qualifying period for business disposals would double – from 12 months to two years.
“This means that anyone planning to sell their business in the short-term will need to plan carefully to maximise the opportunities for tax relief.
“If you fail to pay attention to the new rules, you could face a tax bill that’s double the amount you were expecting – from 10% where you meet the conditions to a hefty 20% where you fail to meet the new two-year rule.”
Francesca said following the Budget, the detailed reports published by the Treasury included a further tightening of the rules which came into effect immediately.
“This criteria means that the relief will only be available to shareholders who have full rights attached to their shares. So entrepreneurs will need to take special care as different classes of shares have different rights, making it easy to trip up over the new rules.
“Planning for the successful sale of a business can often be a drawn-out and lengthy process, and at Dyke Yaxley we are already in discussions with our clients to ensure they will meet the conditions for Entrepreneur’s Relief after April next year.
“It’s also clear that some clients are looking to bring forward the sale of their business interests during the current tax year, to ensure they are benefiting from all the available tax relief opportunities before the changes come into force.”
Francesca Hutcheson – Tax Director