Yearly Archives: 2020

In what The Times described on Saturday as “…the clearest sign yet that the relief is going to be curtailed by Sajid Javid, the chancellor, in March”, Boris Johnson reportedly commented to a group of women entrepreneurs in his Uxbridge constituency that the Treasury is “fulminating” against Entrepreneurs Relief.  The reason given was that it made “staggeringly rich” people “even more staggeringly rich”.The Prime Minister’s remarks give entrepreneurs and business owners who were expecting to capitalise on Entrepreneurs Relief a foretaste of a likely ethical pitch for scrapping or restricting the relief.  The difficulty for affected taxpayers is that in relative – and, often, absolute – terms, the Prime Minister and the Treasury are correct, which makes an ethical argument such as this so very hard to counter.  In the popular imagination, dry economic arguments as to the utility of Entrepreneurs Relief are unlikely to prevail against the unmistakable appeal to basic fairness implicit in the Prime Minister’s words.  And in tax, as with much else in politics, winning the PR battle is crucial.Notwithstanding the speculation in The Times as to the timing of any change to Entrepreneurs Relief, we do not yet know what the Chancellor is planning to announce in his Budget on 11 March.  As such, the nature of any proposed changes to – or the outright abolition of – Entrepreneurs Relief is still unknown.  In parallel, there is not yet any information about whether the Chancellor will increase the headline rate of CGT (which would amount to a double hit for business owners).Just as importantly, it is not clear when changes to Entrepreneurs Relief would take effect.  This makes it difficult for taxpayers to know how to react: they will want to defer action as long as possible if they can, but on the other hand they won’t want to miss out if change is coming soon.  All we can say for now is that the prudent business owner would not bet against changes being announced in the March Budget, to take effect from 6 April this year.Fortunately, there is still time before the Budget (and, especially, the new tax year on 6 April 2020) to take steps to “lock in” to the current favourable tax regime.  I have written about this here.One suspects that the Government will not object to taxpayers triggering CGT disposals in the current tax year, as this will accelerate much-needed tax receipts for the Exchequer.  It will be for each business owner to decide whether or not to do so.

The Budget date has been confirmed as 11 March 2020, which leaves under two months for entrepreneurs and business owners to take stock of rumoured changes to the CGT regime and to take action to “lock-in” to CGT rates at their current historic low.The Government’s General Election Manifesto committed to “review and reform” Entrepreneurs Relief, which had “not fully delivered on [its] objectives”.  Currently, Entrepreneurs Relief offers a reduced CGT rate of 10% to business owner-managers for qualifying disposals up to a lifetime limit of £10m.  This means the relief is worth up to £1m.  In turn, it means that the relief costs the Exchequer between £2bn and £3bn each year – far more than initially predicted.  That is why calls to reform or abolish the relief from within Government, from tax campaigners, and from other commentators have been swelling to their present crescendo.It is widely predicted that the Chancellor will wish to make eye-catching spending commitments in the Budget.  But his ability to do so is constrained given the state of the public finances, the Government’s commitment to balancing the budget, and the so-called “triple lock” in its Manifesto (i.e. a promise not to increase income tax, NICs or VAT).  This all means that an increase in CGT receipts – perhaps including restrictions on (or the abolition of) Entrepreneurs Relief – could provide the scope he needs to fund spending commitments elsewhere.One thing is almost certain: CGT rates will not reduce further on 6 April.Unfortunately for those affected, there is not yet any clarity on the likely nature of the Government’s reforms, nor on their timing.  We understand that the Government is considering all options, which might even include the wholesale repeal of Entrepreneurs Relief in its current form.  No further announcements are expected before the Budget, and the current regime could be withdrawn or amended as soon as 6 April 2020 (we consider an earlier change to be unlikely for practical and policy reasons).  This leaves little time to make best use of the existing £1m tax saving.Clients are already contacting us to ask for advice.  Fortunately, we have encountered these issues before and there are a number of solutions which can maximise the taxpayer’s ability to benefit from the current CGT regime whilst also minimising the downside risks for taxpayers – irrespective of the contents of the Budget.Every client’s circumstances are different and there is no “one size fits all” approach.  The issues involved are complex and cut across clients’ business affairs and their own personal tax and estate planning.  Because little time is available, we recommend that business owners should not delay and should seek advice on their options as soon as possible.