Tax planning for entrepreneurs selling business assets
Lesley Stalker outlines how the increase in CGT and extension of entrepreneur’s relief are likely to affect small and medium sized business owners and highlights the tax planning opportunities available.
The government has extended a reasonable level of generosity to reward entrepreneurs and the wider business community for taking the risks inherent in starting and running a successful concern, although as ever, there are pitfalls to watch out for.
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£808 tax grab
Full marks to Lesley for a well written article on the new EP regime. I often warn my clients about the need to be officers of any company they invest in for at least 12 months. This is so much easier than most people realise. All they have to do is be company secretary (or a company secretary as any number are allowed). As far as I know the secretary is still an officer of the company, even though there doesn't have to be one any more. The HMRC manual makes it clear that the amount of work done or pay received is irrelevant, so long as they have that magic title. It probably helps to sign a few forms on behalf of the company too just to show it isn't just a tax dodge!
One thing most people are unaware of with the new CGT regime is that they've inadvertently helped themselves to an £808 tax grab. Under the old fractional method of calculation, the EP gain was taxed at 18% so the annual exemption was also worth 18%. Now it is only worth 10% so most investors are paying £808 more CGT than they did before (£10,100 x 18-10%). Nice one George. GB would have been proud of that one himself! But we know you didn't mean it.
Chris