ENTREPRENEURS have the potential to save up to £1.8million in capital gains tax over a lifetime thanks to a measure announced in the March Budget.
Chancellor George Osborne announced the 10 per cent Entrepreneurs’ Relief (ER) would be applicable to capital gains of £10million in certain circumstances.
The relief has risen from £2million in 2010, increasing the potential monetary value more than 20 times what it was on April 5 last year.
Before the Budget the relief could have been worth £900,000 in capital gains tax savings.
The message is clearly that this relief is now worth serious money and if business owners haven’t sorted out capital gains tax planning they really ought to.
That was the message to business leaders at a Budget Breakfast hosted by Milton Keynes and North Bucks Chamber of Commerce at the DeVere Harben in Newport Pagnell on March 25.
The relief is only applicable in certain circumstances but business owners can take action to make sure they qualify.
ER is available for trading business and companies where the persons have held a minimum of 5 per cent shareholding as an employee or director for 12 months or more.
The Budget Breakfast meeting heard that spouses, children and civil partners can be made eligible for the relief, in addition to the principal business owner.
> Also generally welcomed was the two per cent reduction in Corporation Tax and a commitment to keep reducing the main rate down to 23 per cent, the 5p increase in the Approved Mileage Allowance to 45p and a freeze on new domestic red tape.
Delegates to the Budget Breakfast were told that as the rate of Corporation Tax comes down it may be worth company directors taking dividends as remuneration rather than salary.
> Changes were also made to the Enterprise Investment Scheme and Venture Capital Trusts. These could make it more attractive to fund equity finance, delegates heard.
However, the Budget Breakfast briefing was also told that the area is very technical.
> The Chancellor in his Budget statement also heralded a crackdown on avoidance of tax, which is currently within the law, not just evasion, which is against the law.
However to do this the taxman has introduced rules on ‘disguised remuneration’ which have been heavily criticised by accountancy firms who believe that without clarification could include things like season ticket payments.
The HM Revenue and Customs says its intention is to stop schemes that avoid, defer or reduce income tax and NICs. But it may be well worth cutting off potential hassle by investing in some professional advice.