Time to Sell?

The Chancellor’s announcement in the 2007 Pre-Budget Report, that capital gains tax (CGT) is to be simplified by the introduction of a new single rate of charge at 18%, means that a business owner thinking of selling up could, from 6 April 2008, pay 80% more CGT on the proceeds of sale compared to the current position.

These changes may have the effect of increasing business purchase and sale activity between now and April 2008 as business owners take the opportunity to sell up before the new tax rate is introduced.

Currently CGT taper relief can be available on the sale of business assets; this relief is particularly valuable for sale shares that qualify as "business assets" for taper relief purposes, as a higher rate taxpayer is liable to CGT at an effective rate of only 10%, after holding the shares for two years. Currently, CGT must be paid at 40p in the £1 in the first year on gains of more than £9,200 (current Annual Exempt Amount). If the asset is held for one year, the CGT rate is 20p in the £1 and 10p in the £1 after two years.

If you have been thinking about selling your business, now may be the time actively to pursue that sale, if you are likely to suffer an adverse tax charge as a consequence of the changes just announced. If you need proactive advice and assistance in connection with a proposed sale or purchase, our Commercial and Corporate Finance Team are here to help.

Key Contact

Tracey Seath  01206 217326

For more information and examples of the effect of the CGT changes post 6 April 2008 on certain capital transactions visit the HM Revenue & Customs website: www.hmrc.gov.uk/pbr2007/pbrn17.pdf

Click here for more information on The Companies Act 2006 and Business Support & Restructuring.