Cookies are small text files that are stored on your computer when you visit a website. They are mainly used as a way of improving the website functionalities or to provide more advanced statistical data.
Capital Gains Relief for Entrepreneurs Announced
Newsletter issue - February 08.
Small businesses had been promised some sort of concession from the proposed hike in Capital Gains Tax (CGT) from 5% or 10% (see below) to 18%. We thought a form of retirement relief would be introduced, but instead a brand new entrepreneurs relief has been announced.
The new entrepreneurs' relief can apply when you sell part or all of your business, or shares in your own company after 5th April 2008. The capital gain will be cut by 4/9ths leaving 5/9ths taxable at 18%. This makes the effective CGT rate on the gain before allowances just 10% instead of 18%. Currently where full business asset taper relief applies a higher rate taxpayer pays CGT at 10% and a lower rate taxpayer pays CGT at 5% on the same gains.
| From sale of a business in 2008/09 | £ |
| Gain from selling your business: | 450,000 |
| Less Entrepreneurs' relief (4/9 x 450,000) | (200,000) |
| Taxable gain before allowances: | 250,000 |
| Less annual exemption for 2008/09 say: | (9,500) |
| Net gain: | 240,500 |
| CGT due at 18% | 43,290 |
Any capital losses can also be set-off after the deduction of the entrepreneur's relief, which was not the case with taper relief.
There are some tight restrictions to the new entrepreneur relief:
- You must be disposing of part or all of your business, and there are likely to be some detailed rules on what 'part of a business' means. If you are selling a single asset, perhaps one field from your farm, entrepreneurs' relief is unlikely to apply.
- You must have held the assets or shares for at least one year before the sale.
- The business must fall under the definition of a trading business, which means a property letting business will not qualify.
- Where you are disposing of company shares you must have worked for, or have been a director or company secretary of that company, and have held at least 5% of the ordinary voting shares.
- The relief only applies to the first £1 million of qualifying gains made after 5 April 2008. Gains in ex£1 million, or which do not qualify for other reasons will be taxed at 18%.
More restrictions may emerge when the full details are known.
If you are planning to sell your business the entrepreneurs' relief may allow you to defer the sale until after 5 April 2008, and not pay any more tax than you would pay if the sale was made before 6 April 2008, but where the gain is expected to run into millions, the maximum tax you will save by claiming that relief is £80,000.
What our clients say about us...
"Paul has provided accountancy services to my company for 2 years now. I can recommend Paul very highly; his skills as an accountant are highly detailed and professional and he is always available to provide advice. One aspect of the way Paul works that I greatly appreciate is a preference to meet face to face when there is a detailed conversation to be had. I personally find this more productive and is a benefit of working with a small accountancy firm that you wouldn't get with the large faceless providers."
ALISTAIR FAIRWEATHER - PROGRAMME & PROJECT MANAGER, DELIVERING/RESCUING I.T. 7 BUSINESS CHANGE WITH BUDGETS UPTO £50M INC SUPPIER MANAGEMENT
"I couldn't ask for more from Paul as an Accountant. Paul has been accountant to Work Relief Charity Recruitment for just over a year now and is proving an invaluable asset. Accurate, knowledgeable, flexible with an emphasis on service delivery, I would recommend Paul's services to any organisation looking for an accounts professional."
Neil Price - Managing Director at Work Relief Charity Recruitment
"Paul was a referral from a family member when I started my business 2 years ago. As this was the first time I had ever run my own company I was totally clueless over the financial side of matters and was worried that I may have made mistakes in any of my accounting. I needn't have worried as after enaging Paul for a set monthly fee he was always there on the end of the phone for all sorts of questions I had and no matter how trivial they were Paul gave me all the information I required and more and did an excellent and painless job at the end of my first year! Couldn't ask for any better to be honest. Just two words - hire him!!!"
Lee Westrap MBCS - Director - Bulldog IT Services
Please complete our form
to request a callback
Competitive fixed quotes
for agreed services
Increase your profit and
reduce tax liabilities
Expert advice for your
business size
