The Conservative party manifesto indicated that there would be a review of Entrepreneurs Relief as they didn’t believe that it had delivered on its objectives.
The benefit of Entrepreneurs Relief is that capital gains tax is paid at 10% on qualifying gains.
This is half the usual rate and is usually a lot more beneficial for the business owner than taking any profit as income or dividends.
The usual route to realise the gains is via a solvent liquidation of the business. This is called a members voluntary liquidation, MVL
In this process, any gain is taxed at 10%.
The budget date where any changes would be made was set as 11th March 2020 but may be delayed due to the change in Chancellor.
Even if it is delayed, that doesn’t give business owners long to consider the steps they need to take in their business and if applicable, start the process of realising any gains for themselves to maximise the use of current tax benefits.
This may be particularly true of contractors operating through a limited company to maximise the benefits of IR35 where those benefits may no longer be available in April 2020.
At Harrisons Business Rescue, we can assist in the liquidation process and identify specialist tax advisers to calculate the correct gain and tax liability as well as any ongoing tax planning.