Word is out that there are going to be some major changes made to the current entrepreneurs relief. Although details are yet to be confirmed, there are talks of the possibility of entrepreneur’s relief to be scrapped in full and announced in the forthcoming budget on March 11th, 2020. Some have argued that the entrepreneur’s relief is expensive and somewhat ineffective, and that the money saved could be used for other purposes that are in dire need, for example our beloved NHS. However, by many based here – and those overseas who saw the opportunity to set up a business in this country – see the UK as a wonderful tax haven for entrepreneurs, providing a discounted rate that they are unable to find elsewhere.
What is entrepreneur’s relief?
Entitlement to entrepreneur’s relief means that you’ll be capped at paying 10% tax on all your income of qualifying assets. It was introduced in 2008, allowing people selling their companies to only pay half the normal rate of capital gains tax on up to one million pounds. With a new government in place, it was then considerably raised to ten million pounds! Yes, you read that correctly, £10,000,000. This was devised with the intention of helping people to grow British businesses, encourage entrepreneurship and bring wider benefits to society – jobs, high street comeback and community cohesion. However, there are certain criteria that you need to hit in order to be eligible.
Eligibility is based on the following conditions
- The business has been trading for at least 2 years up to the date of selling
- You’re an owner (at least 5% shareholding and economic interest) or an employee of the company in question
It is reported that business people who fall into this category, saved a whopping £2.4 billion last year via entrepreneurs relief. So, with such high figures and the benefits stated, why is its existence under review?
The Association of Accounting Technicians have called on the Chancellor of the Exchequer, Sajid Javid, to eliminate the entrepreneur’s relief from existence in the new budget. These are due to claims that there is little evidence to show the impact the savings are making on encouraging entrepreneurialism and that the actual costs to the government are dramatically higher than the £2.4 billion saved by business owners. To add fuel to the fire, the Prime Minister Boris Johnson has stated that the Treasury are zealously against the relief savings being made on sales.
What does this mean for you?
The tenable tax changes will impact you greatly if you are considering selling your business, potentially raising your tax cap on sales from 10% to the usual 20%. A decision needs to be made quickly as March is on our doorstep. Our specialists in our strategic team here at Nordens, can assist you with the entire process. We know that the decision to sell your business can represent one of the most stressful and complicated stages of running a company. We strongly believe that before you even see the finish line, you should know the valuation of your business. We’ve fixed up and fine tuned a business valuation tool so that you don’t have to worry about doing the maths, nor spending a penny for our answer. One simple form is all it takes! Check it out HERE.
Why choose Nordens?
Our process doesn’t stop there. Through highly tailored guidance and advice, our Nordens Strategic team can define exactly how your business can reach new levels of success. Some of you may wish to set new objectives for the business, some of you may want greater analysis in terms of decision making, and most importantly in this case, some of you may want to make significant changes that will increase the value of your company. We interpret your environment, identify key transformations and generate the confidence you need to move forwards – however that may be.
Regardless of how you define success for your business, our strategic services are guaranteed to bring about real and lasting change. In fact, we have a 100% success rate with our clients! So, what services do we offer?
- Bespoke plans for each individual client
- Vision and financial strategies
- Business coaching
- Management issue solutions
- Branding and marketing strategies
- Financial transformation planning
- Strategic planning and forecasting
- Strategic overview perspective
- Enhancement of competitive advantages
If you decide that you are in the market of selling your business, work with our trained accountancy team to achieve the most tax efficient way of doing so. And in some cases, we can review your position and recommend changes to bring you within the requirements for entrepreneurs relief. We’re here to help you. Click the green button for a free consultation. Alternatively, email us on enquiries@nordens.co.uk or call on 02085300720
