If Labour had succeeded in winning the General Election last month, the answer would almost certainly have been YES as they had pledged to abolish entrepreneurs’ relief (ER) in its entirety. With a Conservative majority government, however, the future fate of ER is less clear.
ER can be a very valuable tax relief, reducing the amount of capital gains tax (CGT) on a disposal of qualifying business assets (including shares), providing a tax rate of 10% (compared to the 20% standard CGT rate) and a maximum lifetime saving (per individual) of £1 million.
The Tory manifesto stated that they would ‘review and reform’ ER but it does not say when, how or what they will look to do. There have been suggestions that this could be anything from a reduction in the lifetime limit (currently £10 million) to a complete overhaul of the relief. As the manifesto also suggests that the relief in its current form has not delivered on its objectives, some fairly significant changes cannot be ruled out.
We would hope that any proposed changes to this relief are consulted on prior to being introduced, particularly after the unintended consequences of changes to ER announced in Budget 2018 which subsequently had to be amended at the very last minute. As this is a transactional tax, however, the government may again look to introduce any changes with immediate effect to avoid people undertaking tax planning in any transitional period.
If you are in the process of selling your business or looking to do so in the near future, please do get in touch. With the next Budget date now set for Wednesday 11 March it may be worthwhile considering options available prior to this date including acceleration of disposals or the possibility of crystallising tax relief in advance of any changes.