Chancellor Sajid Javid may be reconsidering what to do with Entrepreneurs Relief in next month’s Budget and may just close it off to new businesses instead of scrapping it altogether.
According to the Sunday Times, in addition to this change, it is believed that the tax break for entrepreneurs selling their businesses would be capped at £1 million worth of capital gains tax (CGT) to pay instead of the current £10 million.
Introduced by Labour Chancellor Gordon Brown in 2008, Entrepreneurs Relief halves the amount of CGT business owners must pay when they sell up, from 20 per cent to 10 per cent on sale.
The idea behind the Relief was that entrepreneurs would reinvest in their businesses rather than sell out when they can. However, Prime Minister Boris Johnson has been quoted as saying that the Relief serves only to make the “staggeringly rich” even wealthier.
According to a selection of accountants and lawyers, business owners concerned about the potential loss of the Relief are accelerating plans to sell their business before the Budget on 11 March, although research by HM Revenue Customs (HMRC) has found that 92 per cent of recipients of Entrepreneurs Relief claim it had no bearing on their decision to start or invest in a business.
However, other commentators claim that entrepreneurs see the Relief as a way of making up their pension deficit because they did not pay themselves a salary or have a pension in place. As a spokesman for the Federation of Small Businesses (FSB) said, making big changes to the relief at this juncture would hit many small business owners who have been planning for their retirement.