Corporate Finance - Anyone for Early Retirement?

The Chancellor of the Exchequer announced, in his first Pre-Budget Report, a number of headline-grabbing measures, affecting both individuals and businesses.

Perhaps most significant of these, for businesses at least, was the abolition of capital gains tax (CGT) taper relief. This appears to have caused an immediate reaction from small firms, especially those looking to sell their businesses as going concerns or to dispose of business assets.

The disposal of business assets will, with effect from 6 April 2008, no longer attract taper relief. Instead, a flat rate of 18% will apply.

This change will be a blow to anyone who was planning a sale of their business (whether an asset sale or a share sale) or sale of business assets, since the maximum tax rate that is currently applied is 10% and this after relevant taper relief.

Initial reports appear to show increased activity on the part of businesses looking to sell assets (although the fear is that, if everybody is looking to sell at the same time, this may impact on sale prices and distort the market).

The joint decision of the CBI, the Institute of Directors, the British Chambers of Commerce and the Federation of Small Businesses to lobby for postponement, or even cancellation, of the Chancellor’s proposals suggests that all may not yet be lost.