Prime Minister hints at end of Entrepreneurs’ Relief
It has been strongly hinted that Entrepreneurs’ Relief will be scrapped under the new Government following words from Prime Minister Boris Johnson.
Speaking to the Times newspaper, Mr Johnson said the relief was helping people who were already “staggeringly rich” to become even richer.
The Entrepreneurs’ Relief allows business owners to pay less Capital Gains Tax (CTG) when they sell (dispose of) all or part of their business. As of January 2020, the reduced rate is 10 per cent on all gains on qualifying assets up to a maximum value of £10 million.
According to the latest statistics, the relief is worth an estimated £2.4 billion to company shareholders each year.
Commenting on the relief this week, Mr Johnson said: “I have to tell you the Treasury is fulminating against it because there are some people who are staggeringly rich who are using that relief to make themselves even more staggeringly rich.”
The Institute for Fiscal Studies (IFS), meanwhile, has described the relief as “unfair”.
“Our new research shows that company owner-managers respond to changes in income taxes by adjusting how and when they take money out of their company and not by changing the amount of income they create or how much investment they do,” said the IFS in October last year.
“Many company owner-managers hold significant sums of cash in their companies in order to access lower capital gains tax rates and thereby substantial tax savings. Business incomes, and therefore the benefits of lower taxes on such income, accrue disproportionately to those at the very top of the income distribution.”
A scheduled review of the relief is set to go ahead this year. If you need advice or support using Entrepreneurs’ Relief in the meantime, please get in touch with our expert team.