The Chancellor of the Exchequer, Sajid Javid, has announced that his first Budget will be delivered on Wednesday 11 March. This will also be the first Budget of Boris Johnson’s premiership and so will obviously attract significant attention.
There are expected to be a number of tax-related announcements, but one area that should certainly be of interest to business owners is that of Enterpreneurs’ Relief. The availability of an effective 10% tax rate on capital gains arising on the disposal of certain business assets/shares has been the subject of much discussion in recent months. In particular, there seems to be a growing consensus that the relief (which applies to qualifying gains up to a lifetime limit of £10m) has not achieved the purpose for which it was introduced. In the section dealing with ‘Backing Entrepreneurs and innovation’, the 2019 Conservative Party general election manifesto noted that, “We also have to recognise that some measures haven’t fully delivered on their objectives. So we will review and reform Entrepreneur’s Relief”.
There are various possible outcomes of such a review, including (i) a reduction to the £10m lifetime limit, (ii) an increase to the 10% effective tax rate, (iii) reform into a different type of business tax relief, and (iv) abolition of Enterpreneurs’ Relief altogether.
Whatever the outcome, in order to ensure that any disposal qualifies for Entrepreneurs’ Relief under the existing regime, an unconditional contract in respect thereof would need to be entered into before 11 March 2020 (assuming any legislation introduced in the Budget is not retrospective).
For further information on this, and our other expectations regarding the forthcoming Budget, please contact Eamonn Donaghy, Mark Hood or June Barton.