Urgent Alert – Update on Entrepreneurs’ Relief
Tax Break for Entrepreneurs’ Reduced by 90% – Will it Survive Another Budget?
Rishi Sunak delivered his budget for 2020 yesterday, March 11th, and has announced that Entrepreneurs’ Relief, the tax break for entrepreneurs, will not be scrapped despite many calls – and expectations – for this to happen. Instead, he has reduced the lifetime limit from £10 million to £1 million.
Whilst this is good news in that it has not been entirely scrapped, this reduction of 90% for the lifetime limit is a solemn hint that Entrepreneurs’ Relief is unlikely to survive another budget, so our advice is to act now and take advantage of what is left.
The other issue is that due to this 90% decrease, a lot of people who have used this relief before may not be able to use it going forward, so in essence to them, it has been scrapped.
Good News for Accountants?
It is worth noting that this reduction could be good news for accountants as they will have to discuss with their clients ways of extracting value from the business prior to sale so that they are within the limit, with one such method potentially being increased pension contributions.
Act Now to Take Advantage of the Remaining Entrepreneurs’ Relief Tax Break
Following our previous article alerting clients to the possibility of the removal of Entrepreneurs’ Relief, we have helped a number of companies wind-up solvently, via Members’ Voluntary Liquidations, and take advantage of the existing Entrepreneurs’ Relief rules. For these businesses/people who acted promptly prior to the budget, this new reduction will not affect these businesses, which helped many people save money.
With the reduction in the Entrepreneurs’ Relief lifetime limit and the likelihood that it will not survive another budget, it may be worthwhile for you or any of your clients looking at claiming entrepreneurs’ relief to contact us to discuss options and how best to proceed, as a matter of urgency.
For more information regarding the MVL procedure, we have a very handy guide which outlines the process and key parts and can be found here.