Cuts to Tax Break for Entrepreneurs in Budget could be Blow for Business Owners
Top accountancy expert David Fort says that the Government’s new Budget next month could be a significant blow for the UK as an SME-friendly country.
David Fort, managing director at Haines Watts, Manchester, believes there could be a side-effect to the Budget which could undermine promising new businesses.
Currently the £2.4bn a year tax break enables business owners to pay reduced capital gains tax when selling a company. However, the policy, which allows entrepreneurs to pay capital gains tax at the lower rate of 10 per cent instead of 20 per cent, has been criticised for being too generous.
David cautioned against the changes, saying: “Business owners that I have been speaking to are concerned about potential cuts to Entrepreneurs’ Relief in the Budget which have only been mentioned briefly since the election.
“Rather than highlighting the UK as a start-up friendly country, any cuts could stifle investment and undermine some of the country’s most promising new start-ups and entrepreneurs.
“Any dramatic changes would certainly hit SME owners who might have been planning for their retirement by taking the relief into account.
“The Chancellor needs to ensure that there is some benefit from investing and growing a business in the UK, with appropriate safeguards in place for any abuse of the relief.”
The Budget is also expected to target how businesses that qualify for Entrepreneurs’ Relief are defined, as the current policy also provides tax relief for big investors within businesses.
David said: “Entrepreneurs’ Relief was capped at lifetime gains of £2m 10 years ago and then increased to £10m a year later under Chancellor George Osborne. From what we have seen, particularly in Manchester, it has certainly helped encourage entrepreneurship in the UK.
David added that post-Brexit eliminating, it would certainly be a blow for the SME community and he said the devil would be in the detail.
He said: “I’d expect that after three years of uncertainty and instability, the Budget should bring about a five-year agenda that will help both corporate and personal planning. One thing is for certain though, if we want to generate wealth in the UK, we need people to continue to invest and build businesses.
“There was not a great amount of detail of taxes or pensions during the election manifesto and with Boris having been in power for such a short time frame, it will be interesting to see what other things will come of the Budget.
“Property has certainly been hit hard in recent years, and I expect there will be a review on inheritance tax (IHT), however, I don’t think any immediate changes will be implemented.”
