A recent article in the Sunday Times has revealed that a number of SME owners are considering selling up ahead of the next general election in order to avoid any potential changes to the entrepreneur’s relief.
Under the current arrangements for relief, company owners who decided to sell their business are taxed at 10% on capital gains of up to £10m, less than half the normal capital gains rate (28 per cent).
But next year’s general election is raising fears that the system could change.
Originally introduced by Labour in 2008, the relief was initially capped at capital gains of £2m, but the coalition raised that to £10m.
Despite this many businesses are worrying that tax breaks will be made less generous or scrapped entirely if Labour regains power.
And they might be right as Labour recently hinted at taxes aimed at people on higher incomes if they win the next election.
One of those to comment in the Sunday Times about the potential change of policy was Robert Prevezer. In June he sold his marketing firm, the Communications Agency, for £8m after fearing a rise in rates.
He said it was currently a massive issue with entrepreneurs who feared losing a large chunk of the value added to their businesses.
He was joined by John Allan, chairman at the Federation of Small Businesses, who said: “Entrepreneurs’ relief encourages people to take the plunge and invest their time and money into building something new.”
“It’s important we maintain, and where possible build, on this relief and other tax incentives that encourage people to join the engine room of economic growth embodied by Britain’s sole traders and small businesses.”
In response to the fears a Labour spokesperson said the party would continue to support entrepreneurs following the next general election.