HMRC are putting pressure on the Government to stop Entrepreneurs’ Relief

There are many reasons why a business owner or entrepreneur would like to sell or close their successful business. It could be that they want to release some funds for their next big project or simply they have worked hard and have now decided it is time to put their feet up and enjoy the fruits of their labour.

To encourage the Entrepreneurial culture the government offers an attractive rate of just 10% Capital Gains Tax to anyone disposing of their successful business. However, this ‘Entrepreneurs’ relief’ has come under increasing scrutiny in recent times with HMRC calling for it to be scrapped believing that many have exploited the scheme depriving HMRC of millions of pounds.

With a general election on the horizon, calls for ‘Entrepreneurs’ relief’ to be scrapped have become even louder, with an estimated £2bn saving for HMRC.

According to the Guardian, Sir Edward Troup, a former executive chair of HMRC suggests that a large number of the country’s richest are exploiting the low Capital Gains Tax rate.

Reporting Sir Edward Troup as saying “This inequity would be almost entirely eliminated by the abolition of entrepreneurs’ relief,” tweeting: “It gives £2bn CGT savings every year to those who have already made their gains and provides no incentive for real entrepreneurship.”

Whatever the outcome of the election we can be sure ‘Entrepreneurs‘ relief’ will remain on the agenda. Even if it is decided to keep the relief it is likely that it will be changed to bring it closer in line with other Capital Gains Tax rates.

 

What to do if you are considering closing your business

If you are thinking of closing your business in the near future it may be prudent to bring your plans forward and consider implementing a Members Voluntary Liquidation.

Business Owners that have closed their company down and are left with cash at bank should consider a Members Voluntary Liquidation (MVL) to effect a Capital Distribution.

Solvent Liquidation can be used to extract Shareholders funds at advantageous Capital rates (potentially 10%) rather than higher Dividend rates.

Please get in touch if you are considering closing your business, White Maund can advise you on the best options.