A question on the lips of many owner managers that have postponed their plans in the wake of the downturn.
Clearwater partner, Jon Hustler, considers this question in Clearwater’s latest edition of its Rainmaker magazine to see if it really is too soon to consider selling your business. “There are plenty of commentators who would still suggest that now is not the right time to sell up, citing that buyer appetite is weak and prices remain depressed. However there are corporate acquirers in the market alongside private equity buyers too and it should be possible to underpin deals with a sensible level of banking. Coupled with this, we have a very favourable Capital Gains Tax (CGT) regime for most ‘owner managers’ which with some planning can be very beneficial for business owners.”
The article highlights the new CGT regime. Whilst the rate of CGT increased to 28%, the Chancellor, not wishing to penalise entrepreneurs, significantly increased the life time allowance for Entrepreneurs Relief – from a maximum of £1m with an £80000 tax saving, to £5m with a £900000 saving. There are three conditions to meet to quality for this relief on a share holding in a trading company, namely the individual must own 5% of the ordinary share capital and voting rights, they must be an officer or employee of the company and they must be able to meet these conditions for at least 12 months prior to any disposal.
And as the relief is available per person, it means that for a business owned between husband, wife and 2 adult children, there is a combined £20m of relief available to them, subject to some detailed conditions. This means a potential tax saving of £3.6m compared with £900k if all the shares were owned by just one family member.