CGT – The Rumours are Circulating

It’s not a secret that the UK government has been spending a fair bit of money over the last few months.  From furlough and eat-out-to-help-out, to reduced tax revenues while businesses have been closed during lockdown, national debt has exceeded £2 trillion.

A new decade of austerity measures could be on the cards…

In the short term, however, eyes are turning towards the impeding November budget and how the Chancellor may use this to start refilling the coffers.

In particular, there are concerns in the business world that CGT could be targeted by the government once again as a means to make up some of its revenue shortfall. Rumours are circulating that CGT rates applicable on the sale of shares and businesses could even double from 10% (for lower rate tax payers) to 20%, and from 20% (for higher rate tax payers) to 40%. Bringing the CGT tax rates up to the same level as income tax rates would have a huge effect on SME owners looking for an exit.

Such individuals may still be able to benefit from business asset disposal relief (BADR, formerly known as Entrepreneur’s Relief), which reduces the CGT rate on capital gains to 10%, but since March 2020, this is, of course, limited only to the first £1 million of lifetime gains, meaning any gains over and above this are taxed at the full CGT rate (whatever that may be).

On the basis of the rumours that are circulating, you may want to act quickly if you are considering a sale of your business, to try and beat any upcoming rate hikes. Please do get in touch with us to see how our corporate team can help you with your sale.

Another option may be to take advantage of the Employee Ownership Trust structure. One of the advantages of this is that, done properly, the process constitutes a full exemption from the payment of any CGT by the sellers on the full amount of the proceeds. Doyle Clayton provides a full service for the delivery of employee ownership trust solutions to its clients. To find out how we can help please see our EOT page, contact Garry Karch Head of our EOT Services or see our EOT webinars - EOT as a Business Sale Alternative and Employe Ownership Trust - Selling Your Business to its Employees.