CGT hike: Would it impact on investment?

/in /by

Investors and entrepreneurs have warned Britain will lose fast-growing startups if the government raises capital gains tax (CGT) in its October budget.

CGT is tax on any profits or gains you make when you dispose of an asset. Assets not only apply to the sale or exit of business but can also apply to the sale of items such as offices and trademarks. Even the goodwill built up by your company could ultimately be taxable.

According to a report by business news provider Bloomberg, Gibraltar, Dubai, Bermuda and the US may appear more attractive to startup chiefs if there is a CGT hike.

There are also fears that any hike in the rate will deter investment, not only in large businesses, but in SMEs.

Speculation is growing that capital gains will be targeted by the Treasury as the new Labour administration looks to plug what it describes as a £22bn black hole in the government’s finances.

Chancellor Rachel Reeves has declined to rule out a rise after warning that difficult decisions will have to be taken – a stance also taken by prime minister Sir Keir Starmer in recent speeches.

In an interview with Bloomberg Television, Ms Reeves said that the UK will strike the “right balance” on tax at the Budget on October 30.

The chancellor said: “Of course you need to bring in the revenue to fund vital public services, but we’ve also got to grow the economy.

“I won’t do anything that makes it harder to achieve that economic growth and prosperity.”

According to some reports, she may be planning to increase the rate of CGT in line with income tax.

Analysis by wealth management firm Quilter has warned that if that happens it would mean landlords could face paying an average of £11,000 extra when disposing of property.

Currently basic rate taxpayers are charged 18 per cent on gains and higher rate taxpayers are charged 24 per cent. Raising rates in line with income tax would increase these figures to 20 per cent and 40 per cent respectively.

When he was chancellor, former Tory prime minister Rishi Sunak was reported to have shelved a proposal to hike CGT to help him plug the post-Covid hole in his finances.

The Office of Tax Simplification (OTS) had recommended changes to CGT to bring it to the same levels as income tax, after being asked by the chancellor to carry out a review of the system.

The OTS had also proposed lowering the annual allowance on the tax – a levy on any profit made when selling an asset.

However, according to reports, the then chancellor had pointed to the “burden” such a proposal would place on tax collectors.

A minister at the Treasury was said to have told the OTS at the time: “These reforms would involve a number of wider policy trade-offs and so careful thought must be given to the impact that they would have on taxpayers, as well as any additional administrative burden on HMRC.”

  • To discuss any issues raised by this article please contact me on 01772 430000

Sam bowls everyone over

/in /by

Guy’s Thatched Hamlet at Bilsborrow was the perfect canalside setting for WNJ’s summer team event.

A great time was had by everyone as they enjoyed the venue’s hospitality and took part in a very competitive crown green bowling tournament which was the centrepiece of the activities.

In a hard-fought final Sam Dears, a member of WNJ’s accounts and audit team, came out victorious against his colleague James Hart.

Sam, pictured left, said: “I’d like to say commiseration to James as he bowled exceptionally well to reach the final.

“A huge thank you also to the partners and associates for organising the afternoon and to Guy’s for their excellent hospitality.

“I have bowled a bit previously so it was nice to get the victory, but it seems like everyone had a great time regardless of winning or losing! Good luck to everyone for next year!”

The competition was followed by a barbecue and drinks in the pavilion and as an added bonus the weather just about held out.

Guys, with its iconic thatched roof buildings, sits just off the A6 Garstang Road at Bilsborrow, and is a popular all-year round destination.

Family owned and run for more than four decades by the Wilkinson family, WNJ has acted for the business for many years.

Confidence falls as small business challenges rise

/in /by

Small business confidence fell back into negative territory in the second quarter of this year as firms looked with trepidation at the government’s employment rights shake-up.

The FSB’s Small Business Index (SBI) lost all the ground made up by the first quarter’s welcome return to positive sentiment among small firms.

Construction was the least optimistic of the main sectors but the wholesale and retail sector was not far behind.

The new government has declared its Employment Rights Bill, unveiled in the King’s Speech, as “the biggest upgrade to workers’ rights in a generation”.

It says the bill is designed “to make work pay”. It will see a ban on what it describes as “exploitative” zero-hours contracts, end fire and rehire, and introduce basic employment rights from day one.

The bill will make parental leave, sick pay, and protection from unfair dismissal a day one right for all workers – subject to probationary periods.

It will also make flexible working the default from day one for all workers and update trade union legislation, removing restrictions on trade union activity and simplifying the statutory recognition process.

According to an FSB report, following the King’s Speech, nine out of ten small employers were concerned about the prospect of increased costs and risks when they employ people.

Commenting on the latest SBI findings, Tina McKenzie, FSB’s policy chair, said: “After a strong start to 2024, we were all hoping that the latest quarter would be just as positive for small businesses – if not more so. But sadly, it was not to be.

“Small businesses are looking with trepidation at the government’s forthcoming plans to change employment, which could both increase risk around small businesses employing people, and the costs when they do.

“The rise of labour costs will hold back economic growth, and points to the possibility of a contraction in small business job numbers, which would be terrible news for firms, for staff, for local communities and the national economy.”

She added: “Taxes and employment costs are already soaring for small employers. The government should formally index the Employment Allowance to the rising living wage to help alleviate pressure on small firms and resolve the economic inactivity crisis.

“Every line in the government’s employment plans must be checked for negative impact on growth and jobs.

“The construction sector’s woes, with the lowest confidence reading among the major sectors, underpins our calls for more support for small housebuilders, such as reforming the consumer infrastructure levy, so small building firms can access the finance they need.

“The government’s 1.5 million homes target cannot be achieved without new policies to unlock the potential of small housebuilders.

“With reported revenues in the second quarter not matching the predictions small firms made at the start of the year, there are signs that the small business community found the going tough.”

She went on: “We’re still waiting for action from the government on the long-running sore point for small firms of late payment.

“This could be tackled by giving audit committees of large firm’s oversight of payment practices in their annual reports – something that would not cost the government a penny, but which could help millions of small businesses’ cashflow improve significantly.

“Overall, the small business community is looking for reassurance from the government that it is listening to their concerns, especially around tax and employment.

“The fall in confidence among small firms is disheartening, but need not become a self-fulfilling prophecy. With the right support, we know that small businesses can thrive and drive the economic growth that the government has said is its priority.

“Now, as we head into the next quarter, we’re staring down the barrel at some tough challenges if we want to rebuild confidence.”

  • To discuss any issues raised in this article please contact me on 01772 430000