With Capital Gains Tax increases continuing to look more likely; now is the right time to begin the process of selling your business

The 12th November 2020 Financial Times headline reads: ‘Overhaul of UK Capital Gains Tax (CGT) urged in review’ following the release of the Office for Tax Simplification’s report into CGT – if adopted, the wide-ranging proposal would impact businesses owners. The report recommends ‘greater alignment’ between Income Tax and CGT, highlighting the billions of pounds it could raise for the Treasury.

Furthermore, with the Chancellor recently announcing the extension of the Coronavirus Job Retention Scheme (furlough scheme) until the end of March 2021, which will further increase the burden of the economic support for taxpayers to shoulder, tax increases in the future are becoming increasingly likely.

The window for low CGT rates is closing

Against the background of the scale of Covid-19 related public spending change now appears almost inevitable at some stage in the future. Whilst the impact of coronavirus on the economy in the short term may prevent an increase in a March 2021 budget, the window of opportunity for business owners to benefit from lower CGT rates appears to be closing. If not, then an increase is looking increasingly likely either in the Autumn Statement next year or the following budget in March 2022.

Now is the right time to begin the sales process of your business

Now is a good time for business owners, many of whom have put off the sale of their business, to commence a sale process. Typically, a sale process is likely to take 9 – 12 months from preparing an Information Memorandum (IM) and completing the deal. Starting over the coming weeks will allow the lead time necessary to prepare an IM with a view to going to market in early 2021.

The impact (if any) that covid-19 has on the valuation needs to be weighed against the potential tax saving and the extent to which revenues and growth can reasonably be expected to return to pre-covid levels.

For further information, or to discuss your specific circumstances, please contact our Corporate Finance Team here or via the below contact form. We will happily discuss your plans and provide the Brighter Thinking advice that you need to consider the potential implications and the timescales involved in selling your business.

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