Act now - CGT rates can only rise

8th February 2010

Leading Black Country law firm Higgs & Sons is urging shareholders in private companies to take advantage of current low Capital Gains Tax rates, ahead of anticipated rises after a General Election.

With CGT rates as low as 10-18 per cent, now is the perfect time to seriously consider succession planning, according to Susheel Gupta, partner at Higgs & Sons.

Susheel said: "We have already seen income attacked with the new 50 per cent rate, which comes into force in April, and further increases are already announced for April 2011.

"The budget deficit is expected to exceed £170 billion. We can expect more tax rises in the pre-election budget due this March and, almost certainly, significant tax rises in a post election budget. Accordingly, the relatively low capital gains tax rates currently enjoyed are an easy target for the Chancellor."

Susheel suggests where shareholders have a succession route already in mind, be it to other family members or to a management team, they must ask how long will CGT rates stay as they are.

He adds: "Where the price is right we can structure the deal to crystallise clients' capital gains tax liability at the current low rates.  In six months time it may be too late."

Similarly, other simple tax planning measures should be taken to mitigate their tax exposure, advises Susheel. "Business owners are facing a double whammy where turnover is down but tax rates up, but there are simple measures they can take to help them through this situation."

Ways to minimise tax exposure include:

  • Ensuring the correct business structure is in place to maximise effective tax rates at business, shareholder and employee level
  • Accelerating income payments, dividends and/or bonus payments to fall before 6 April 2010 (i.e. whilst the top rate of income tax remains at 40 per cent)
  • Where possible, dividing share ownership between family members or other business entities to maximise tax reliefs that may be available
  • Keeping key staff incentivised through the use of tax efficient share schemes while cash flow is tight.

Susheel emphasises how tax planning in the current climate has never been more important, with a number of measures available to businesses to save money.


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