Tax & admin · 19 November 2015

George Osborne’s Autumn Statement could see Entrepreneurs’ Relief in danger

Since the pre-election triple lock? pledge to stay clear of increasing income tax,  national insurance or VAT until 2020,  reliefs on capital gains have looked an obvious target for George Osborne
Since the pre-election triple lock? pledge to stay clear of increasing income tax, national insurance or VAT until 2020, reliefs on capital gains have looked an obvious target for George Osborne
Tax professionals have warned thatentrepreneurs’ Relief could be vulnerable in the chancellor’s upcoming Autumn Statement, as George Osborne looks to make savings beyond the planned welfare cuts.

The benefits of the relief are worth 3bn a year on latest estimates, and some campaigners have called for the tax break to be halted.

Richard Murphy, a director at Tax Research UK, pointed to official analysis that found 1.8bn in tax relief was enjoyed by around 3, 000 individuals for the 2013-2014 period, who each sold their company stakes for more than 1m. Their tax relief was worth an average of 600, 000 each.

The relief was claimed by 43, 000 for that year allowing those selling a firm to pay capital gains tax on their profits at a reduced rate. Rather than facing a charge of 28 per cent, business owners pay ten per cent on disposals up to a lifetime limit of 10m.

this relief is literally giving wealth away, Murphy told the Financial Times. I’ve never met someone who genuinely set up a business because of the tax relief, it simply doesn’t work that way.

As the Treasury looks to tighten its belt, Entrepreneurs’ Relief could be on the chopping block, with the overall cost of the relief standing at 2.9bn last year 2bn more than originally predicted by HMRC. Back in the 2008-2009 period, it was 360m.

Chas Roy-Chowdhury, head of taxation at Association of Chartered Certified Accountants (ACCA), believes the value of the relief means that it is likely to be a topic of conversation within an Autumn Statement that’s likely to centre around spending.

anything that can the government money, particularly because of the tax credit fiasco, must be up for grabs, he said.

The parliamentary public accounts committee had criticised HMRC’s failure to routinely monitor the costs? of Entrepreneurs’ Relief back in November 2014and the government firmed up rules in March to try and prevent abuse using contrived structures.

Since the pre-election triple lock? pledge to stay clear of increasing income tax, national insurance or VATuntil 2020, reliefs on capital gains have looked an obvious target.

Following the Summer Budget, Paul Aplin, a partner at AC Mole & Sons, said capital gains tax was the dog that didn’t bark.


 
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Rebecca is a reporter for Business Advice. Prior to this, she worked with a range of tech, advertising, media and digital clients at Propeller PR and did freelance work for The Telegraph.

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