Craig Blackmore, a director at Verde Corporate Finance, says this year’s Budget is likely to be an interesting one to say the least!
The Government will be looking to deliver on election promises to increase spending but clearly will want to maintain a balancing of the books – so tax increases must be on the way in some shape or form.
One area of potential tax raising identified by economists is Entrepreneurs Relief (“ER”). ER was introduced in 2008 under Gordon Brown’s Labour Government, to replace the very long-standing Retirement Relief. ER provided lifetime relief on up to £1m per person on capitals gains tax when they sell their business and has since increased to a cap of £10m. ER also cuts the capital gains tax rate in half from 20% to 10% – clearly attractive to entrepreneurs who want to minimise tax to be paid when they sell their business.
Leading economists and experts including former HMRC executive chair Sir Edward Troup have said that consideration should be given to abolishing ER altogether. Estimates are that ER costs the treasury £2bn per year in lost tax which would certainly help contribute to Government spending plans. Abolishing ER would be seen as anti-business and something a Conservative Government is unlikely to want to be remembered for, but will the savings argument be too compelling to ignore, or will it be restricted by amount and scope?
With the Budget just days away – new chancellor Rishi Sunak will deliver his first Budget on 11th March – there could be little time for entrepreneurs to plan for this. To be fair, with Mr Sunak only being in the hot-seat 28 days on Budget Day, he hasn’t had much time to plan for this either! If changes happen then they could be immediate or could be phased in over time. If the latter happens then entrepreneurs have time to take advice and plan for expected implications.
The GS-Verde Group is continually working with entrepreneurs to successfully plan their exit strategies with the ability to execute a full service approach to legal, finance and taxation matters. Whilst the imminent Budget deadline could present too tight a timescale even for us, planning for outcomes once the ER decision is known should be made sooner rather than later. We may not await the Budget with bated breath but many with a vested interest will be very interested to hear what the new Chancellor has planned.