Many in the City and further afield anticipate the end for entrepreneurs’ relief (“ER”) in March this year, in particular following the Prime Minister’s campaign comments in the run up to the December 2019 general election. Changes to the relief in Autumn 2018 limited its application to try to ensure that those benefiting from the reduced rate of capital gains tax were ‘genuinely’ invested in a business. However, critics continue to focus on a relief which provides up to £1 million in tax savings for an individual with qualifying investments.
Founders of businesses in the UK and others who have been modelling their retirement based on ER gains may take some comfort from a rumoured softening of approach by the Chancellor of the Exchequer. Whether ER will remain in its current form or instead a new, more targeted relief will be introduced, remains unclear. It shouldn't be forgotten that ER itself was a fix for what were considered its overly generous predecessors business asset taper relief and retirement relief. For some, the ability to elect to crystallise gains made in recent tax years with the benefit of ER should be considered. In the meantime, we may see the more cautious looking for a partial or full exit ahead of 06 April. For those thinking on this subject it is worth noting that under current rules a full exit is not required in order to crystallise all of the gain.
Sajid Javid is considering rowing back on plans to remove a tax break for entrepreneurs following an outcry from company founders who were relying on it for their retirement.