The Budget – Selling your Company
The Budget is an announcement that business owners often keep a close eye on and this year’s Autumn Budget to be delivered on 30 October 2024 is no different. The change in Government and previous comments from Chancellor Rachel Reeves suggest that changes are on the horizon.
Having pledged not to increase income tax, VAT (save for private school fees) or national insurance, Labour’s options appear to be limited.
Capital Gains Tax & Business Asset Disposal Relief
One item that is often discussed in the build up to any Budget is Capital Gains Tax (CGT) and the related Business Asset Disposal Relief (BADR), formerly known as Entrepreneurs’ Relief. This year, both CGT and BADR seem to be taking the headlines.
Currently, CGT (of either 10 or 20%, dependant on income tax band) may be due on the sale of shares (and other assets) with a gain of over £3,000 – in the event BADR can be applied to the sale of shares (limited to a lifetime limit of £1m), CGT will be charged at 10%.
Much of the pre-Budget speculation has focused on (i) the CGT rates increasing, potentially in line with income tax, (ii) the annual allowance of £3,000 decreasing and (iii) BADR either being subject to more conditions or scrapped in its entirety.
What to do now?
Whilst you may want to try and rush through a sale of your company (or part of your company) to maximise your gains, it may not be the wisest action as (i) buyers will be aware of this speculation and potentially able to strongarm a reduction in the purchase price or (ii) you may rush into an agreement which does not fully and effectively protect you post-sale.
Additionally, the above is all speculation at this stage – therefore, the changes proposed by Rachel Reeves may not impact CGT or BADR as set out above or, if they do, there may be a set period before being implemented.
You may also consider it beneficial to explore a sale (in full or in part) to an Employee Ownership Trust (EOT) as such sales can be made free from CGT. Sales to EOTs are also often linked to improved business performance and employee engagement – which in turn potentially drive growth in the company’s value.
Should you which to discuss any corporate matters, including selling or buying a business or company whether to a third party, EOT or otherwise, please do not hesitate to contact our Corporate & Commercial Department on 0330 024 0214.
Disclaimer: General Information Provided Only
Please note that the contents of this article are intended solely for general information purposes and should not be considered as legal advice. We cannot be held responsible for any loss resulting from actions or inactions taken based on this article.
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