Industry leaders, Quantuma have issued a warning today that Entrepreneurs’ relief may be axed comments director James Pirrie.

They encourage an “act now” approach given that an announcement could be given as soon as the budget speech on March 11th.   The withdrawal of the relief could be with immediate effect.

Entrepreneurs’ relief can offer valuable solutions for married couples who have separated.  Two problems crop up in particular: first there are those who struggle to stretch the pint of the existing resources far enough to meet the quart of needs of two separate households.  Secondly there are those who have cash-rich businesses, perhaps built up entirely during the marriage and they are looking to share the value of the business between them.

Entrepreneurs’ relief has until now provided the magic-wand solution for some of these couples; its withdrawal risks a further tightening of the challenge for those seeking best outcomes.

ER is available to those disposing of their interest in a business, where for the two years prior to that disposal, they have been a sole trader or have been a business partner.  What they receive for disposal of that business share is then:

  • Taxed as a capital gain
  • And a concessionary rate of only 10% is applied.

Often couples face higher rate income tax charges (which could therefore be at percentages as high as 60% if the personal allowance tax trap is involved).  However, careful management of the exit could permit the spouse who is perhaps a director or company secretary in the family business, to extract funds at an effective tax rate of only 10%.

With only weeks to go before the potential cliff-edge, immediate progress is needed.  It may make sense to carry out the business disposal now, even if the rest of the matrimonial financial deal follows on only later.