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MSI's Carlisle-based accounting firm Armstrong Watson offers advice to business owners who may be affected by the concession confirmed in the Budget on the 12 March 2008.
In his first budget Alistair Darling confirmed the so-called Entrepreneurs’ relief, which reduces the effective rate of capital gains tax on the sale of qualifying business assets to 10 per cent. As the standard rate of CGT chargeable from 6 April 2008 is 18 per cent, and as indexation relief and taper relief will be withdrawn on the 6 April 2008, this is a significant concession.
However, as with all tax legislation, the devil is in the detail. When is the relief not available?
Susan Winter of Armstrong Watson said: “In response to robust representations made by employer and business groups, the changes to capital gains tax that will apply from 6 April 2008 will now include a measure of relief for business owners disposing of qualifying assets after this date.
“The relief will allow up to £1million of appropriate lifetime disposals after the 5 April 2008, to be taxed at an effective rate of 10 per cent. While this is a welcomed concession there are a number of circumstances when the new relief will not be available. For instance:
• The sale of business assets without a sale of the business.
• Any business which are not trading businesses.
This could affect farmers selling off parcels of land. It would also be an issue where a property used by the owner’s personal trading company is sold either to the company or to a third party without the sale of the shares.”
On the face of it Entrepreneurs’ Relief is a welcome change in the new CGT regime that will apply after 5 April 2008. Business owners would be wise to check out their CGT position, before contracts are exchanged. At risk is a possible increase in your capital gains tax bill from 10 per cent to 18 per cent.
For more information
Please contact Dannielle Bishop at Armstrong Watson
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