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BREAKING NEWS: Darling unveils new entrepreneurs' CGT relief

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DanMartin

DanMartin

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May 14, 2007
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Alistair Darling has just announced a concession to small business owners reeling from his controversial capital gains tax reforms. Speaking in the House of Commons, the chancellor announced the introduction of a 10% "entrepreneurs' relief" on profits worth up to £1 million made in a business sale. Read more here.
 
Well, I'm glad common sense prevailed. But what a prize pillock Darling is. I wouldn't trust him to run a bath properly :(
 
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Agree entirely.

But on the face of it, great news for small business owners.

Let's see what's in the small print though, as too often with this government there have been a swathe of nasty devils in the details of new legislation.

Thank goodness Darling et al finally took advice from business pressure groups, something they completely failed to do last year when introducing the reform in a shoot-from-the-hip action.
 
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DuaneJackson said:
Was there any clarification on whether you still needed to hold the asset for 2 years to benefit from the 10% rate?
Click to expand...

No, taper relief is completely out the window.

So in fact this will be a big improvement on the existing regime for anyone holding business assets for less than 2 years.

Although I didn't find the details on the goverment website, I spoke to a guy at the FT who said that the entrepreneur relief will apply to anyone who owns a minimum 5% stake in the business. They have to be an employee, company director or other officer, so this seems to rule out any passive shareholders selling their stake. I look forward to finding out more.
 
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I think I'm fairly happy with the arrangement.

With a less gaff-prone Chancellor you could be forgiven for thinking it was all a ruse. That the plan was always to have this entrepreneurs relief and they've buttered us up first by making us think it was going to be 18% across the board.

Would have been nice to have the bar set a bit higher, perhaps 5 million. but it'll do. I'm surprised they didn't stick with what was put out last night as that could have had a positive spin put on it.

Will be interesting to see the response of the FSB, etc.
 
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Here's what John Wright, the FSB's national chairman, has said:

"The Chancellor said specifically today that he wanted to help small businesses facing big tax rises from April and that is very good news indeed.

"The entrepreneurs' relief he announced today is close to the proposals we put forward at the end of last year. They will go some way to protecting entrepreneurship in the UK as well as benefiting small business owners planning to pay for their retirement with the sale of their businesses.

"We welcome these plans, but the way in which the whole issue has been handled has seriously eroded small businesses' trust in the Government. There has been huge uncertainty about what small businesses' tax liabilities would be from April 2008 and this has made planning for the future very difficult. Even now small business owners have very little time to prepare before these new changes come in."
 
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there have been a lot of people hard at negotating the purchase of businesses before the April deadline when the 18 % would have kicked in. The urgency in those negotations to get to a close asap has just been taken off.

That said the buyers will just have to pay a bit more to close the deal and they will get it back now when they sell.

All round excellent news.

I would not trust the current lodger in No11 with running my kids saving book though never mind the finances of the country:eek:
 
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adventurelife said:
there have been a lot of people hard at negotating the purchase of businesses before the April deadline when the 18 % would have kicked in. The urgency in those negotations to get to a close asap has just been taken off.

That said the buyers will just have to pay a bit more to close the deal and they will get it back now when they sell.

All round excellent news.

I would not trust the current lodger in No11 with running my kids saving book though never mind the finances of the country:eek:
Click to expand...


I don't think the urgency has entirely receded, depending on your situation.

I'm in the process of selling a business property that I've had for 20 years. With the taper relief I expect to pay around £4K CGT if I sell this tax year. Next tax year I would have had to pay over £30K according to my accountant. Now that our Darling chancellor has pronounced I think I'll "only" have to pay £10K if I don't sell till after 6 April.

You think the urgency has just been taken off? Not for me it hasn't!

Wish me luck.
 
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JohnG said:
Darling does exactly what Gordon Brown tells him.
Click to expand...
darling-tax-blunder.jpg
 
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Duane I think the 'infraction' should be given to Mr Darling (amongst other things)

I'm not sure the news is that great as £1 million is still a fairly low threshold. Although it is an improvement on what was proposed.

Let's hope this U-turn signals an end to sweeping tax reform without consultation/notice. Somehow I doubt it.
 
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JohnG said:
I don't think the urgency has entirely receded, depending on your situation.

I'm in the process of selling a business property that I've had for 20 years. With the taper relief I expect to pay around £4K CGT if I sell this tax year. Next tax year I would have had to pay over £30K according to my accountant. Now that our Darling chancellor has pronounced I think I'll "only" have to pay £10K if I don't sell till after 6 April.

You think the urgency has just been taken off? Not for me it hasn't!

Wish me luck.
Click to expand...

Yes it does still impact on some businesses but on lots it will not. Wish you well with the selling hope it goes through quick:)
 
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Clearly everyone on this thread has not read the revised Tax legislation. You're acting like you've been given something, whereas you've had something taken away.

Currently a company can be sold (if owned for more than 2 years) at 10% CGT.

New Tax laws state:

1) The first £1m is 10% (same as current rate);
2) Anything above £1m is 18%;
3) And the big one - NUMBER 1 IS A ONCE IN A LIFETIME CONCESSION AND ONCE YOU'VE USED YOUR ONCE IN A LIFETIME CREDIT IT'S 18% FOR EVERYTHING THEREAFTER. That is why the Treasury is laughing all the way to the bank (of England).
 
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Steve Roberts said:
Clearly everyone on this thread has not read the revised Tax legislation. You're acting like you've been given something, whereas you've had something taken away.

Currently a company can be sold (if owned for more than 2 years) at 10% CGT.

New Tax laws state:

1) The first £1m is 10% (same as current rate);
2) Anything above £1m is 18%;
3) And the big one - NUMBER 1 IS A ONCE IN A LIFETIME CONCESSION AND ONCE YOU'VE USED YOUR ONCE IN A LIFETIME CREDIT IT'S 18% FOR EVERYTHING THEREAFTER. That is why the Treasury is laughing all the way to the bank (of England).
Click to expand...

Yes, this government does have a habit of making you happy that you've been given something - until you find they've actually taken more away from you (witness GB's last budget where he "gave" us a lower tax rate having just upped his take by removing the lower rare band).

It's the same when you manage to get a tax rebate: you feel really happy until you realise it was your money in the first place! And the govt has been getting the interest on it while they've been hanging on to it.
 
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Steve, you are dead right. Remember it took a few hours for the details to surface yesterday.

The 'once in a lifetime' concession is a real kick in the teeth for serial entrepreneurs. The £80,000 tax reduction isn't much of an incentive to hold up entrepreneurial spirits. Most serial entrepreneurs will probably ignore its minor impact on their plans and are more concerned about the effective 80% rise in tax on their gains for the rest of their life.

Furthermore, one of the main incentives to retain key staff has been removed. How many own more than 5% of the company they work for? Nearly all are going to be hit hard with the near doubling of tax on any gains made on shares after the meagre annual allowance.
 
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Oh yes, one glaring omission that has put thousands of entrepreneurs in a complete spin. This affects those people who are receiving part of their payment for their business in shares or loan notes as an earn-out (deferred payment).

They have less than a week (by Jan 31) to inform HMRC whether they are paying the CGT immediately or are to defer it until they are able to cash them the shares or notes in. The consequences of making a wrong decision can be enormous, and the HMRC has not issued any guidance at all, and looks as though the situation has not even occurred to them.

Owners eligible for full business asset taper relief will pay just 10% on disposals made before April 6th but 18% on later sales. However, many with earn-out rights will not have sufficient cash to take advantage of the lower rate.

Another fine mess you got us into, Alistair.
 
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