Is your Entrepreneurial Spirit being curtailed?
In December 2019 we saw a spike in MVL’s from clients who were concerned at the possible outcome of the General Election. Both Conservative and Labour Governments had made specific mention of their intentions to review Entrepreneurs Relief and clients wanted to lock in the existing entitlements by placing companies into liquidation and receiving a capital distribution before the winning Party could think about changing the rules.
The dust has now settled on the election but it seems there may be a second spike in solvent liquidations seeking early capital distributions in the first quarter of 2020. The Conservative Government intends to set out its Budget on 11th March 2020 and Entrepreneurs Relief (originally introduced by a previous Labour Government…) is something they have pledged to “review and reform”. As part of the election manifesto, the Government cites tax savings of £2.4m per annum currently enjoyed by business owners. Comments made by Boris Johnson certainly suggest he is not a fan of the tax!
There seems to be a number of places the Conservative Government could go with Entrepreneurs Relief, including changes to the current tax rate of 10%, reducing the lifetime limit down from £10m, to simply abolishing the tax altogether.
We have already started getting enquiries and clients are trying to decide on the optimum date for liquidation (particularly clients with “IR35” companies that have recently ceased trading ahead of the changes coming into effect in April for Off Payroll working). If there are to be changes to Entrepreneurs Relief, when might those changes come into effect? On the one hand, those rules might come into effect on the day of the budget but on the other hand, the start of the new fiscal year is less than four weeks after the budget.
If you have clients who are considering the merits of a solvent liquidation and an early distribution of capital ahead of any changes that might come, now is the time to consider options and start planning. For a free no obligation discussion, please contact us.