Relief for owners of small firms scaled back

The Daily Telegraph - Your Money - - MONEY - Harry Bren­nan

The Chan­cel­lor left cap­i­tal gains tax (CGT) broadly un­changed in the 2018 Bud­get but tweaked rules on tax relief for entrepreneurs by ex­tend­ing the qual­i­fy­ing pe­riod for the tax break from 12 months to two years.

There had been calls to scrap the relief, but Philip Ham­mond de­fended its role in sup­port­ing a dy­namic econ­omy. Entrepreneurs pay a lower 10pc rate of CGT, com­pared with the standard rate of 20pc, when they sell all or part of their busi­ness if the cap­i­tal gain is more than the an­nual ex­empt amount of £11,700.

From April 6 2019, to qual­ify you must be a sole trader or busi­ness part­ner and have owned all or part of a busi­ness for at least 24 months be­fore you sell.

The relief is claimed by about 50,000 in­di­vid­u­als each year and av­er­age claimants typ­i­cally save about £8,000 in tax.

Sam Bir­chall, 26, from Leighton Buz­zard, Bed­ford­shire, runs his own busi­ness sell­ing home-made fudge. He

said: “Any pol­icy that helps en­cour­age entrepreneurs is a good thing. It’s very daunt­ing set­ting up your own busi­ness: you put in your own cap­i­tal and hope that you’ll make enough to break even. But the ben­e­fit of do­ing some­thing you love is worth it.”

Other changes aim to tackle some who were abus­ing the relief by re­strict­ing the tax break to peo­ple who have at least a 5pc stake in the com­pany’s prof­its and as­sets.

Neil Lan­caster of ac­coun­tants Blick Rothen­berg said: “Pre­vi­ously some peo­ple with less than a 5pc in­ter­est in a com­pany would ar­range to in­crease their hold­ing to 5pc of the share cap­i­tal and vot­ing rights, but not 5pc of the eq­uity or eco­nomic rights in the com­pany.”

This meant that they could take ad­van­tage of the tax break with­out gen­uinely com­mit­ting cap­i­tal to the growth of the com­pany.

Sam Bir­chall runs his own busi­ness sell­ing home-made fudge. He called it ‘daunt­ing’

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