Entrepreneurs concerned over possible CGT hike

Business advisors are warning that the uncertainty surrounding the Government's plans to increase Capital Gains Tax (CGT) could see a number of entrepreneurs and small business owners rushing to get rid of assets.

The recently formed Coalition Government has indicated that it will bring CGT rates for "non-business assets" in-line with income tax levels in an attempt to tackle the UK's debt. As a consequence this could see the current rate of 18% increase to around 40% or higher.

Accountancy firm, Ernst & Young, believes that despite the promise of "generous exemptions for entrepreneurial business activities" could prompt small business owners to rush through the process of selling assets.

Andrew Tailby-Falkes, Private Client Services Partner at Ernst & Young, commented:

“We don’t yet have any detail about whether these reliefs will be limited in value or restricted to certain types of business activity.

“As such, entrepreneurs who are in the process of selling their business, or who are planning to do so in the near future, may wish to try to get a deal done before the rate change happens. This level of uncertainty could spark a flurry of corporate disposals in the short term.”

The Government have not yet clarified as to whether the changes will be implemented immediately or whether this will begin in April 2011, the beginning of the next financial year.

19/05/10