Will Entrepreneur’s Relief be abolished after the election?

 In News

Under current rules, small business owners pay just 10% capital gains tax on qualifying assets when they sell their companies. This is a significant reduction on the normal rate of 18% or 28%, potentially saving as much as £1.8 million in some cases.

However the Entrepreneur’s Relief tax scheme has proved controversial, costing the Tax Man around £2.9 billion in the 2013-2014 financial year alone – three times as much as estimated.

Significant cuts needed

Following the General Election in May, analysts expect the new government will need to make some significant cuts to help stabilise public finances. Having already attracted criticism, the Entrepreneur’s Relief scheme could be one of the first benefits to be cut.

Introduced in 2008, there has been a 500% increase in the cost of the scheme, leading some MPs to question whether the system is being abused at significant cost to the taxpayer. Despite being introduced by the former Labour chancellor Alistair Darling, most of the calls for a radical redesign, or complete abolition, of Entrepreneur’s Relief are coming from his party.

SMEs consider action now

Billed as one of the tightest General Elections in living memory, the Labour Party currently enjoys a slight lead in the opinion polls, which has caused concern to business owners thinking about selling their companies. SME business owners who want to avoid losing this valuable tax break may need to sell up before May or face paying the full rate of Capital Gains Tax.

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