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There have been quite a few tax surprises in the leading parties’ manifestos ahead of the general election on 12th December. Not least amongst these is the possible abolition of Entrepreneurs’ relief (ER) by both the Conservative and Labour parties.
Currently ER reduces the amount of Capital Gains Tax (CGT) payable on the sale of qualifying business assets. The relief which was introduced in 2008 reduces the rate of CGT payable on qualifying gains from 20% to 10%. The relief is not always straightforward but can be extremely valuable where significant gains are realised. Gains of up to £10m can potentially qualify for the relief which reportedly costs the government £2bn a year.
The Conservative manifesto promises to ‘review and reform entrepreneurs relief’. The relief has been criticised in some quarters for supposedly being too generous to investors and failing to incentivise entrepreneurship. Many commentators have taken this to mean that the relief will probably be abolished. The Labour party have already undertaken to abolish CGT as a whole with gains becoming liable at marginal income tax rates.
It seems clear that we can expect some changes to ER after the general election with the relief either being replaced or restricted. Over the years CGT has often seemed like a favourite tax for successive Chancellors to tinker with and it seems that its turn is coming around again.
Some people will already be thinking whether they should trigger gains to crystallize the relief in advance of any changes. However that is not something to rush into. A similar situation arose back in 2008 when some may recall taper relief was abolished. It is to be hoped that if these changes do go ahead that there will be a suitable period of time for planning.
At this stage anyone planning to realise medium or long term capital gains that would currently qualify for ER needs to be aware that the relief may not be available at that time.
For more information or tax planning advice, please get in touch with Graham Arnott on 01768 222037 or email firstname.lastname@example.orgContact Graham
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