Business owners have been urged to consider bringing forward plans to sell up as fears arise that politicians will target an important tax relief for entrepreneurs after May.
Baker Tilly’s Corporate Finance Team in Scotland has urged business owners to “think about the timing of selling their business” ahead of the general election in case advantageous tax reliefs currently offered are cut under a new government.
The chartered accountants firm has argued that the incoming government might find it difficult to maintain Entrepreneur’s Relief, which has cost the tax man over three times the original estimated cost when it was introduced.
The National Audit Office recently calculated that the actual cost of this relief in the tax year 2013/14 was £2.9billion.
Baker Tilly has reported seeing an increase in business owners who are concerned that a potential change in government could see this lucrative tax benefit reduced or scrapped.
Ewan Grant, Corporate Finance Partner for Baker Tilly in Aberdeen, said: “Entrepreneur’s Relief is an extremely popular tax initiative for business owners, so it’s not surprising that the take-up of it has resulted in a much larger cost to government than originally anticipated.
“We’ve already started to get calls from entrepreneurs concerned that any change in government next year may result in the reduction or scrapping of this relief, and what impact this could have on the sale of their business.
“We simply don’t know whether a new government would continue to support this initiative, but with less than six months to go until the general election, I would encourage business owners to think about the timing of selling their business and to seek professional advice on any commercial or tax considerations.”
Entrepreneur’s Relief is one of the most popular tax breaks in the UK, Baker Tilly said.
Under the relief scheme business owners pay less capital gains tax – 10% on qualifying assets, instead of the normal rate of 18% or 28%. Individuals have a lifetime limit of £10million of taxable gain, meaning they will have saved £1.8million if they use their full limit.