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Entrepreneurs’ Relief: the end of the 10% tax rate?

28 January 2015

Entrepreneurs’ Relief is a valuable tax relief for business owners. It reduces capital gains tax to a rate of only 10% on up to £10m of qualifying gains – a saving of up to £1.8m. However, rumours are circulating that the May 2015 election could result in this relief being restricted or even abolished.

Unfortunately, is it impossible to assess whether or not there is any foundation to these rumours.

However, in 2014 the National Audit Office calculated that Entrepreneurs’ Relief costs the Government more than three times the projected estimate, a point highlighted in critical comments by the chairman of the House of Commons Public Accounts Committee. With a dwindling public budget and party-political pressure to make cuts where possible, it is fair to say that the permanence of Entrepreneurs’ Relief is currently in doubt.

What does this mean in practice?

This is relevant to you if you are intending to sell an interest in a business after 5 April 2015 and you would qualify for Entrepreneurs’ Relief under the current rules.

If you are in this position and you are concerned about the uncertainty surrounding Entrepreneurs’ Relief then there are a number of options available to you to crystallise your gains in advance of possible future tax changes so that you can take advantage of the current preferential rate.

By taking pro-active steps and planning for these changes now, you may still qualify for the relief and the reduced capital gains tax rate of 10%, potentially saving up to £1.8million – even if the ultimate commercial sale is still some distance in the future.

This article was written by James Austen.

For more information on the options available to you, or if you have any other tax concerns in relation to the sale of your business interests, please contact James on +44 (0)20 7427 4547 or james.austen@crsblaw.com.