Blog – September 2020
The Treasury have certainly been “flying some kites” recently regarding possible changes in the tax regime. Rumours abound regarding Capital Gains Tax (CGT) being aligned to Income Tax rates and, of more concern to sellers of private businesses, the possible abolition of Entrepreneurs’ Relief.
Part of the problem appears to be the so called “Triple Lock” which is the manifesto commitment not to raise Income Tax, National Insurance or VAT. Given that these account for around 60% of the total tax take, this leaves precious few options assuming the Government don’t break their previous commitment – not a certainty given recent proposals on the EU Withdrawal Agreement.
The cost of Entrepreneurs’ Relief to the treasury was only £2.7bn in 2018/9 yet estimates of ultimate tax rises necessary are c.£40bn(1). However the relief was cut in March 2020 from £10m to just £1m, so the cost to the revenue is likely to be much lower from now on.
There is an argument that any tax rises should be deferred until the economy is stronger, to which we concur. Our own prediction is that Rishi Sunak will actually leave Entrepreneurs’ Relief well alone – possibly a result of the name itself. After all, which government wants to appear to be cracking down on entrepreneurs?
Just a shame (according to President George W Bush) that the French haven’t got a word for it!
(1) Source: Paul Johnson, Institute for Fiscal Studies