The end of Entrepreneurs’ Relief?
Before the last election most business owners were worried about Labour’s plans to abolish ER. But tucked away on page 34 of the Conservative manifesto was a statement that “…we will review and reform Entrepreneurs’ Relief’.
A lot of people spotted this and assumed the next Budget would announce a period of review. This would give business owners time to make informed decisions on their future. Last Saturday’s Times disrupted this view when it reported Boris Johnson telling a group of entrepreneurs that “the Treasury is fulminating against entrepreneurs’ relief because there are some people who are staggeringly rich who are using that relief to make themselves even more staggeringly rich.”
There is now a real risk that ER might be abolished as soon as the Budget on 11 March 2020.
This is a cause for concern for business owners close to selling their businesses.
So what should business owners do? It is certainly too late to start taking a business to market and beat the deadline but some people are still able to exit before any change. Parties who are already in the middle of negotiations should work hard to complete before 11 March. Some transactions do not involve going to market: family members contemplating a sale between themselves might aim to get a deal done before the deadline and strategic buyers may take the opportunity to make an approach to targets.
There are also some tax planning ideas that crystallise the capital gain now (locking in entrepreneurs’ relief) without creating a tax liability until a future sale of the business.
Most people recognise there are problems with the ER regime. There were abuses of the system but, in the main, these abuses were not led by entrepreneurs and business owners who risked their own capital to create wealth for the economy. It would be unfortunate if true entrepreneurs lose out as a result of other people gaming the system.