Business Sale Report Blog - News and views on buying and selling businesses

Well, what a surprise. Several hours after the chancellor announced the changes to the capital gains tax regime yesterday, a few very nasty details emerged.

The first startling discovery was that ‘entrepreneurs’ relief’ is in fact a misnomer. The 10% CGT rate turned out to be a lifetime allowance, an effective kick in the teeth for all serial entrepreneurs for whom a one-off £80,000 tax concession will not make a huge difference. They are more concerned about the 80% tax hike they will have to wear for all their hard work for the end of their days.

Secondly, this new two-tier system will require a whole raft of new anti tax avoidance legislation to be drawn up - so much for the supposed objectives of creating a simple system.

Thirdly, the government is striking out one of the chief incentives for retention of key staff. Any employee with less than 5% of the company they work for is ineligible for the Entrepreneurs’ Relief. Not many can lay claim to that level of stake-holding. The vast majority of employee shareholders will therefore face a near doubling of tax rates on share gains.

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Alistair Darling today issued a major concession to the forthcoming capital gains tax changes due to come into effect on 6th April.

A new 10% Entrepreneur’s Relief is to introduced (similar to the old Retirement Relief), for business owners selling up and making gains of less than a million pounds. Under the CGT plans announced at the end of last year, the existing taper relief would have been replaced with an across-the-board flat 18%, meaning an effective 80% hike in tax rates for vendors. This will now be lowered to 10% for business sale gains of under one million pounds.

Small business owners should welcome these changes, as it certainly goes some way to reclaim the ‘entrepreneur spirit’ many outraged business pressure groups have said the government had damaged with the new proposals.

Nobody I have spoken to about this has yet manged to locate the fine print on the government website, so watch out for the devil in the details!

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