One of the giants of the accountancy sector has revealed how business owners have expressed concern that some of the more popular tax reliefs will be scrapped if a new government is elected into power in May 2015.
According to the Midlands corporate finance team of Baker Tilly, a number of calls have been received from business owners who want to know more about how the scrapping of the tax relief would affect their company, especially Entrepreneurs’ Relief. This was introduced on 6th April 2008 and provides relief on the Capital Gains Tax, which is paid on the sale of a business. Rather than paying the usual rate of CGT, which is 18 per cent or 28 per cent, a business owner would only pay 10 per cent CGT on any assets that qualify for the tax.
Taxable gain has a lifetime limit of £10 million and, if the full amount is used, they will have benefited from a saving of £1.8 million.
However, a recent calculation by the National Audit Office revealed that the cost of Entrepreneurs’ Relief during 2013-14 was £2.9 billion – more than three times what is was estimated at when it was introduced. If the government changes in May 2015, the benefit could be scrapped.
Baker Tilly has advised entrepreneurs to consider finalising any business sales before the general election takes place.
Types of tax relief for UK small business
Capital allowances are among the most popular tax reliefs, claimed when you purchase business assets. The method used to claim the allowances is based on turnover, with sole traders or partners with an income of less than £81,000 being able to use the simpler cash system. You can claim Annual Investment Allowance on plant and machinery up to £500,000.
Research and Development Relief can be claimed by any business undertaking activities connected to R&D that is also liable to Corporation Tax. The two schemes for claiming R&D relief are the SME scheme and the Large Company scheme. Higher rates of relief are available under the SME scheme. The definition of an SME for R&D purposes is a company with fewer than 500 employees and either an annual turnover below €100 million (£78.24 million), or a balance sheet that is less than €86 million (£67.29 million).
Claiming all eligible relief can significantly reduce a tax bill. If you are considering selling your business or want advice regarding tax relief, contact us at The Accountancy Partnership.
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