08-11-2007
Hold nerve on company sales
A BPE corporate expert is urging business owners to hold their nerve on company sales in the wake of proposed Capital Gains Tax changes announced by the Chancellor last month.
Capital Gains Tax is paid on the increase in the value of assets such as a business.
Changes to capital gains were announced in the Chancellor’s autumn statement, which could see business owners face increased tax bills of up to 80 per cent if they decide to sell after April next year.
Tim Ward, a partner in BPE’s corporate team, says if business owners panic to sell their companies because of the proposed tax hike, they could create a buyer’s market, with increasing pressure to discount company sales before the legal documents are signed.
“Gloucestershire and the West Midlands have hundreds of successful owner-managed businesses and since the Chancellor’s unexpected CGT announcement last month there has been talk of little else in the business community,” said Tim, a family business specialist in BPE’s eight-strong corporate team.
“Many clients have spoken to us to canvass our thoughts on the subject, especially those who were looking forward to making the most of the Taper Relief rules introduced by Gordon Brown in 1998.
“We’re advising business owners to stay calm and not to rush into any hasty decisions about selling before April as we suspect, for many of them, the money they will save in tax could be lost in a sale due to buyer pressure to discount the price. In some cases the better approach will be for owners to focus their efforts on maximising the profitability of their company in order to optimise the valuation and the price payable in the long term,” added Tim.
Trade unions, the CBI and other business organisations have joined forces to oppose the plans with the result that the government has promised people selling to retire that they may be able to obtain tax relief on the first £100,000 of profit.
The Federation of Small Business is encouraging people to sign an online petition against the tax change. More than 15,000 people have already put their name to the campaign.
“There are already so many factors to consider when selling a company, business owners do not need to feel pressured into acting before they are ready. Each business sale needs to be considered on its own merits remembering however that the Chancellor has already proved he is willing to consider concessions demanded by business and so further changes may be announced before April.
“One private equity house with whom I am currently managing a transaction, has been inundated with approaches of potential sale mandates since the announcement, so it appears that many business owners are prepared to take the risk of a business price reduction to avoid filling the taxman’s coffers,” added Tim.
Capital Gains Tax is paid on the increase in the value of assets such as a business.
Changes to capital gains were announced in the Chancellor’s autumn statement, which could see business owners face increased tax bills of up to 80 per cent if they decide to sell after April next year.
Tim Ward, a partner in BPE’s corporate team, says if business owners panic to sell their companies because of the proposed tax hike, they could create a buyer’s market, with increasing pressure to discount company sales before the legal documents are signed.
“Gloucestershire and the West Midlands have hundreds of successful owner-managed businesses and since the Chancellor’s unexpected CGT announcement last month there has been talk of little else in the business community,” said Tim, a family business specialist in BPE’s eight-strong corporate team.
“Many clients have spoken to us to canvass our thoughts on the subject, especially those who were looking forward to making the most of the Taper Relief rules introduced by Gordon Brown in 1998.
“We’re advising business owners to stay calm and not to rush into any hasty decisions about selling before April as we suspect, for many of them, the money they will save in tax could be lost in a sale due to buyer pressure to discount the price. In some cases the better approach will be for owners to focus their efforts on maximising the profitability of their company in order to optimise the valuation and the price payable in the long term,” added Tim.
Trade unions, the CBI and other business organisations have joined forces to oppose the plans with the result that the government has promised people selling to retire that they may be able to obtain tax relief on the first £100,000 of profit.
The Federation of Small Business is encouraging people to sign an online petition against the tax change. More than 15,000 people have already put their name to the campaign.
“There are already so many factors to consider when selling a company, business owners do not need to feel pressured into acting before they are ready. Each business sale needs to be considered on its own merits remembering however that the Chancellor has already proved he is willing to consider concessions demanded by business and so further changes may be announced before April.
“One private equity house with whom I am currently managing a transaction, has been inundated with approaches of potential sale mandates since the announcement, so it appears that many business owners are prepared to take the risk of a business price reduction to avoid filling the taxman’s coffers,” added Tim.
