Taxing times

Yet another article has appeared in the national press about the withdrawal of tax breaks for people who sell their business. It is the fifth article in four months and many business owners are starting to get very worried. At the moment if you sell your business for, say, £1 million, then you will usually be able to claim entrepreneurs’ relief which means that you will pay tax of just £100,000 (10 per cent) on the proceeds of the sale. The usual capital gains tax rate is 28 per cent so if entrepreneurs’ relief were to be abolished, your tax bill on a £1 million sale would increase by £180,000 to £280,000. This could have a massive impact upon people’s behaviour. THE CONSEQUENCES The first consequence could be that people would be discouraged from starting new businesses. The great majority of people who start their own business hope to sell it one day and if the net proceeds of the sale were to be reduced, they may well decide that the risk of leaving a safe job to become an entrepreneur was simply not worth it. Agents hoping to sell their business and retire may not raise enough money to…