Latest on Abolition of Entrepreneurs’ Relief
There has been much talk recently about “review and reform” (or abolition) of entrepreneurs’ relief. This seems to have moved a step closer this week with Boris Johnson stating that the Treasury are “fulminating” against it on the basis that it made “staggeringly rich” people “even more staggeringly rich”. The debate about this was kicked off last November with an IFS study highlighting that the benefits of the relief were concentrated among the wealthy and Edward Troup, former head of HMRC, saying that it was costing £2bn a year in tax while providing “no incentive for real entrepreneurship”.
So it now looks like a question of when and how much, rather than if, entrepreneurs’ relief will be curtailed. The important question for individuals in the process of, or thinking about, selling and hoping to claim entrepreneurs’ relief on their gain is when they have to sell by to avoid any reduction or abolition of the relief. The options appear to be:
11 March – this is when the Chancellor will make his Budget speech and it is possible that he will announce immediate change;
6 April – it is more likely that if there is a Budget announcement that it will be effective on sales from 6 April, although there might be an “anti-forestalling” provision that also captures transactions from 11 March that have been artificially constructed to benefit from the relief without taking the real commercial consequences of selling; or
a later dated following a consultation process (such as Royal Assent for the Finance Act 2020 or 6 April 2021).
While there is still no certainty that changes will be made or when, people who are concerned that any change to the relief will adversely affect them and who are in the process of a sale or might want to enter into one should discuss the possibilities with their advisers.