In what is becoming a near-annual sport, there are again renewed calls for the restriction or outright abolition of CGT Entrepreneurs' Relief.
The latest high-profile support for the move comes from Sir Edward Troup, previously the head of HMRC, in response to a campaign launched by the Guardian newspaper.
Such reports are always unsettling for business owners who are in the process of (or at least contemplating) the sale of their business.
But how short are the memories of some of those who are contributing to this debate: far from being a give-away for the rich, when Entrepreneurs Relief was introduced in 2008, it represented a significant restriction on tax relief for business owners. Previously, they had the benefit of business asset taper relief and retirement relief (un-capped by value), which gave far greater tax savings in many cases.
This point alone does not answer bona fide and knowledgeable policy objections to the Entrepreneurs Relief regime, but those are - yet - few in number.
Further agitation of this sort is likely to unsettle business owners who had assumed that they would benefit from Entrepreneurs Relief in due course. So what are they to do?
Irrespective of the colour of the next government, big new spending commitments seem likely. These will need to be paid for one way or another. Business owners should not make the mistake of believing that frequent complaints about Entrepreneurs Relief followed by inaction will continue forever. Entrepreneurs Relief costs HM Treasury approximately £2.7bn a year - about three times more than intended when it was first introduced. There are plenty of those in Government, as well as outside, who would like to bring that cost down or eradicate it altogether.
Difficult though it might be for some business owners to accept, the political reality is that trimming or abolishing Entrepreneurs Relief is a relatively easy and low-risk option for a Chancellor in need of funds for high-profile new spending commitments.
So prudent business owners would be wise to pre-empt possible changes to the regime where possible:
- If a business sale is in process and it is possible to exchange contracts before the new Government takes office on Friday 13 December, then it would seem preferable to do so;
- That said, CGT rate changes in the middle of a tax year are extremely uncommon and lead to a number of technical problems for HMRC and taxpayers, so on balance any change of the rules should be unlikely to take effect before 6 April 2020. It follows that - unless the new Government takes unexpectedly radical action - business owners wishing to sell should endeavour to exchange contracts by that date;
- For those looking to sell in a longer timeframe, it was in the past possible to take steps to "lock-in" to Entrepreneurs Relief rates before a change in the law, but the law, HMRC practice, and the approach of the Courts and Tribunals have all moved on in recent years. Anyone wishing to investigate this will need to take expert legal advice in good time before any change in the rules;
- Lastly, for those with no sale at all in prospect, the Entrepreneurs Relief regime is of little practical relevance to them. There seems little they can do now other than hope for a benign tax system when they do eventually sell.
Sir Edward Troup, who was executive chair of HMRC from 2016 until January 2018, said whichever party won the general election on 12 December should abolish the “entrepreneurs’ relief” applied to capital gains tax (CGT).