Date28 Jul 2021
Business owners planning to sell or exit their business should seek professional advice sooner rather than later to mitigate the risk of a significantly increased tax liability, a leading corporate finance expert has warned.
It comes amid ongoing silence from the Treasury around rumoured changes to Capital Gains Tax (CGT), which had been expected to feature in the Chancellor’s Spring Budget 2021 on 3rd March.
Despite record levels of M&A activity in the build-up to the Budget – with Azets advising on 50 deals in just ten weeks – no announcement was made, and CGT reform was again overlooked on Tax Day on 23rd March 2021.
It is now considered that the changes, which could potentially include more than doubling the top rate from 20% to 45% and taxing accrued profits of owner-managed companies at income tax rates, could well be announced during the Autumn Statement 2021 or Spring Budget 2022.
“Rumoured changes to Capital Gains Tax haven’t happened yet but, politically, it remains a soft target and we consider there to be a relatively high likelihood of reform this autumn or in spring 2022,” said Mark Selby, National Head of Corporate Finance with Azets, the UK’s largest regional accountancy firm and business advisor to SMEs.
“Business owners who are already planning to sell or exit their business should consider accelerating plans and speaking to an advisor sooner rather than later to mitigate the risk of a significantly increased tax liability.
“For many businesses, the pandemic has presented opportunities to trade at or above normal levels and demonstrate a strong, resilient business model. However, delaying a sale to fulfil growth ambitions might be futile if value growth is outweighed by tax increases.”
Mark Selby urged business owners to seek professional advice in order to understand the best course of action for their circumstances and ensure they are making the best financial decision ahead of any changes to CGT.
He added: “The sale of a business – from a standing start – typically takes between six and twelve months. However, if a business is well organised and desirable, and potential buyers are readily identifiable, it is possible to accelerate timeframes.
“Whilst the banks’ appetite for non-CBILS funding was subdued in 2020, we are now starting to see a shift towards support for borrowing, which remains historically cheap for businesses. There is also the option of private equity, which is as diverse and sophisticated as it’s ever been. All in all, for many businesses, if a sale or exit is being contemplated in the next two or three years, then 2021 could well be the time to consider accelerating those plans.”