• ICAEW
  • XERO GOLD PARTNER
  • KASHFLOW

 

0161 928 3276

 

 

We understand our clients

Changes in Capital Gains Tax

Newsletter issue - June 2010.

The Coalition Programme for Government, published on 20 May 2010 contains this pledge:

We will seek ways of taxing non-business capital gains at rates similar or close to those applied to income, with generous exemptions for entrepreneurial business activities.

This strongly hints at an increase in the rate of Capital Gains Tax (CGT) due on gains arising from non-business assets. The easiest way to do this would be to increase the rate of CGT for all assets and provide tax relief to reduce the effective rate of CGT for selected business assets, or for assets used for 'entrepreneurial activities'. This could mean increasing the scope of existing tax reliefs such as entrepreneurs' relief, or roll-over relief on business assets.

We do not expect the rate of CGT to change before 6 April 2011, however some commentators think a change could be introduced from the next Budget on 22 June. It would be very complicated for the Taxman to programme his computers to calculate CGT at two different rates for the same taxpayer within one tax year. It is also extremely unlikely that a rise in CGT would be imposed retrospectively back to 6 April 2010. Between 6 April 1988 and 5 April 2008 CGT was charged at the taxpayer’s marginal income tax rate, and this seems to be the solution the Government is leaning towards.

So what should you do before 6 April 2011 (or 22 June 2010 if ultra cautious), to avoid paying more tax? If the asset you plan to sell cannot be regarded as a business asset – for example a holiday cottage that does not qualify for furnished holiday lettings, then we should discuss the implications of making a disposal now rather than later. Remember a disposal need not be an outright sale, a transfer to a trust would give rise to CGT, but possibly also inheritance tax. If you make the disposal before 6 April 2011 rather than afterwards, the payment date for CGT is brought forward one year, and this needs to be balanced with the apparent tax saving.

It is not clear how far the 'generous exemptions’ for business activities will stretch. If you currently qualify for entrepreneurs' relief as you have been a business partner, sole trader, or shareholder and employee holding 5% or more of the voting shares, for at least a year, it is probably reasonable to assume the assets connected with your business will continue to qualify for that tax relief. If you don't fall into any of those categories, you should talk to us about the risk of increased CGT, bearing in mind the level of the expected gain.

You also need to look at your projected total income for 2011/12, and the likelihood that the gain will be covered by your annual exemption for CGT. This exemption is currently £10,100 per person for 2010/11, but this could be cut back to perhaps half that amount!

The CGT changes discussed above are currently all speculation so please talk to us if you are concerned at all. We expect some definite changes to be announced in the Budget Statement on 22 June 2010. Look out for our Budget newsletter when we will explain the Budget announcements relevant to small businesses and individuals.

 

To work Smarter in your Business Contact Beauchamp Charles

Contact Us

"Join our newsletter for hints, tips and tax advice"

 

What our clients say

Dakins Property Services

Great Results, Personable, High Integrity

Choice Events Limited

All at Beauchamp Charles are very helpful, approachable and easy to talk to. They keep me informed with key dates; I can feel totally confident that I won't ever miss any deadlines! Whoever I deal with, always deal with matters professionally and efficiently and if they are unavailable they get back to me promptly.

FT leisure Ltd

I have worked with Beauchamp Charles as our management accountants for over 20 years and have never received anything less than exceptional service. Their approach is both professional and personal. Finances and particularly tax strategies are a minefield for small businesses; Beauchamp Charles have in-depth knowledge of these area, which is comforting. They pay very close attention to our business activities and have provided financial strategies that have helped our company develop.

Fredrick Thomas Electrical and Maintenance

We have used Beauchamp Charles since company formation back in 1998. Beauchamp Charles offers us a one to one service as they are small enough to offer this dedicated service and large enough to do the work and offer best advice. They get to know us as individuals and a business, always giving sound advice. Frederick Thomas Electrical are in a stronger place thanks to the service we get from them.

Barnes Walker Landscapes Limited

We are a small business and had employed the same accountancy firm for many years. Two years ago we took the decision to switch to Beauchamp Charles after several othe local businesses recommended them very highly to us. We have not been disappointed with the service they have provided to us over these last two years.