The Office for Tax Simplification (OTS) has published the results of its eagerly awaited review on Capital Gains Tax (CGT).
Its recommendation to align the rate of CGT with that of income tax comes as no surprise. Disappointingly for many business owners, an increase in the rate of CGT will potentially mean there will be significantly more tax applied to the proceeds of the sale of a business.
Most business owners sell a business only once. Often their business growth and success is the result of years of hard work and sacrifice. It seems harsh to reduce their reward for their efforts and dedication at this stage.
Experts expect that CGT changes will be announced in the 2021 Spring Budget *which is due to be held on 3 March 2021, and that they are then likely to take effect from 6 April 2021 (the new fiscal year).
At the time of writing there is limited time to make the most of current tax rates. A popular way of extracting shareholder value is placing the company into a solvent Members Voluntary Liquidation.
Before deciding to proceed business owners face the challenge of selling the business as a going concern, which may attract a goodwill value in excess of tangible net asset value, or winding the business down and distributing the surplus assets to the shareholders.
If you are a business owner considering your options we can assist and advise you on maximising the value of your business at sale. Alternatively, we can assist with a Members Voluntary Liquidation if you wish to extract the value from your business under the current tax regime.
We work with entrepreneurs, providing comprehensive business and tax advice and services.
Please contact us for further advice on exiting your business.
*updated on 18 December 2020.