Budget countdown prompts business owners to act

Business owners, directors, and investors are rushing to complete sales and exit strategies ahead of the anticipated October 2024 Budget, according to a south coast law firm. Ellis Jones Solicitors has reported a surge in capital gains tax (CGT)-related instructions from clients eager to avoid potential increases in tax rates or the reduction of available reliefs.

CGT is a tax on profits made from the sale or transfer of chargeable assets, including company shares, second homes, and other significant possessions. For business owners, current rules provide some relief under Business Asset Disposal Relief (BADR), previously known as Entrepreneurs' Relief, which allows qualifying gains of up to £1 million to be taxed at a favorable 10% rate. Amounts exceeding this threshold are subject to CGT rates of 18% or 24%, depending on the seller's tax band.

However, speculation is rife that the Chancellor may either abolish or reduce BADR, or increase overall CGT rates in the Budget. This has driven business owners to fast-track asset sales to secure existing tax advantages.

Neil Cook, Partner and Head of Business Services at Ellis Jones, described the urgency among business owners: “We’ve been inundated with clients who are desperate to complete deals before any Budget changes take effect. There’s genuine concern that retirement plans could be jeopardised by sudden, higher tax rates, without any grace period.”

The volume of CGT-related cases at the firm has significantly increased since the General Election, according to Ellis Jones Partner Wayne Spolander. He noted that the trend has only intensified as the Budget date approaches: “We’ve handled deals across various sectors, from garden centers to amusement parks. The looming prospect of tax changes has clearly accelerated decisions.”

Ellis Jones’ experience mirrors a national trend. In its latest business sentiment survey, the British Chambers of Commerce found that taxation concerns have overtaken inflation as the primary worry for many business owners.

With the possibility of immediate changes to CGT, Ellis Jones urges business owners to seek advice from both legal and tax experts. "While we provide legal expertise, those navigating this landscape should also consult tax professionals for comprehensive guidance," Spolander added.

In the run-up to the Budget, government ministers have stated that they will not raise the main rate of Corporation Tax above 25% and will maintain the current headline rates for VAT, personal income tax, and National Insurance. Nonetheless, uncertainty around CGT remains a key driver for those looking to exit businesses before any major policy shifts.