BUSINESS owners should be aware of potential changes to a key tax relief on selling or liquidating your business that may be announced in the upcoming Budget.

Entrepreneurs’ Relief (ER) was first launched in 2008 and allows a business owner to make gains on disposing of their business at just a 10 per cent rate of tax on the first £10m of total gains since 2008, so it’s generous. Without ER, a business owner would pay a top rate of 20 per cent capital gains tax.

However, unlike previous Budget predictions where ER has been mentioned by commentators as being “at risk”, that’s been pretty much Budget guessing to spice things up.

This is now a specific proposal by the government so we expect something to happen – but we don’t know what, or when it might be effective from.

An announcement could be made in the Budget with effect from Budget Day, or with effect from the new tax year in April, or even for 2021 or just kicked down the street for another “review”.

Possibilities could be to increase the tax rate for ER, or reduce the lifetime allowance, or increase the qualifying period even further, or perhaps make it go back to something like Retirement Relief with an age threshold.

We doubt that the Conservatives would abolish ER entirely as that might feel too “anti-business”.

Bringing your business disposal or cessation forward to before Budget Day might be of benefit, but it might well not. The timescale could be very short, perhaps too short, to accomplish much.

There are other factors in your decision too – including reviewing that everyone involved does actually qualify already for ER or considering whether other tax rules might apply such as the “phoenixism” rules.

If you want to discuss how possible changes to ER might impact you call Rob Durrant-Walker, tax director at Garbutt + Elliott, on 01904 464119.