Warning from Jarrovian Wealth about Entrepreneurs' Relief
Chancellor's Entrepreneur Relief name change will spread confusion and isn't helpful to small business, warns Jarrovian Wealth
The reduction of the lifetime limit for Entrepreneurs Relief from £10 million to £1 million, announced by the Chancellor in his Budget last month, was a major blow to small businesses. But it is not the last of changes proposed to this important tax benefit.
What Risha Sunak failed to disclose was plans to re-brand Entrepreneurs Relief to the rather clunky Business Asset Disposal Relief - changing something that sounded (and is) a positive relief for those creating new ventures, jobs and keeping the economy running - into something that sounds a negative or bad thing.
There are also concerns that the new name could cause confusion. The word asset in the title suggests it will be available for a bigger range of purposes than it actually is - it wont.
Graeme Price, Co-Founder and CEO of Jarrovian Wealth, says that entrepreneurs dont need any more tweaks and changes that could add yet more confusion to an already complex set of tax relief rules.
Entrepreneurs Relief has been around since 2008 and changing its name after 12 years, to something that could cause confusion and sounds negative, on top of a huge change to the amount of relief available, seems madness especially during the current climate. Constant meddling of tax reliefs, and in doing so bringing in a new level of confusion, really doesnt help anyone. We need to encourage the entrepreneurial spirit as small firms have been, and will continue in the future to be, the backbone of the British economy, says Graeme.
Entrepreneurs Relief provides a lower rate of Capital Gains Tax, 10%, to be paid when disposing of all or part of a business. Certain criteria must be met including the entrepreneur being a sole trader or business partner, and they need to have owned the business for at least two years.
Jarrovian says there are other reliefs such as Investors Relief that lets shareholders (who are not employees engaged in the day-to-day running of the business) benefit from a 10% rate of capital gains tax on the first £10 million of capital gains tax. It is now more important than ever to ensure your share capital is properly structured from outset to assist the growth of your business and to allow for the utilisation of the reliefs available to you.
About Jarrovian Wealth
JW was established in 2017. Our team of skilled and experienced financial planners does more than just look after the numbers for clients around pensions, investments and protection – both personal and business. We get to know and understand the deeper motivations and aspirations, so we can challenge people to think bigger. While knowing they are in a safe pair of hands building up a secure financial future. We may be one of the newer players, but we are packed with experience as our clients have been trusting our experts with their financial lives for over 30 years. We don't just focus on individuals we incubate businesses too helping entrepreneurs and those up and running to get ventures off the ground, stay on track and plan the perfect exit strategy, so owners can focus on the day job of running the show. JW's headquarters are in London.
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PAUL SMITH ASSOCIATES
8th April 2020