Bath advisors have welcomed a number of measures in the Budget, although the decision to cut, rather than scrap, Entrepreneurs’ Relief received a mixed response.
Entrepreneurs’ Relief (ER) – a reduced Capital Gains Tax rate aimed at incentivising the building of successful businesses – has been criticised in some quarters for mainly benefiting wealthy business owners rather than entrepreneurs. 
In the Budget, Chancellor Rishi Sunak slashed the relief by 90% – reducing the lifetime allowance from £10m to £1m – in a move the Treasury calculates will raise £6.3bn over the next five years.
Jon Miles, tax director of Bath-based chartered accountancy firm Richardson Swift, pictured, said the decision not to totally scrap ER would be welcomed by owner-managers when they ultimately exited from their business, assuming no further changes were on the horizon.
“In terms of the relative number of businesses affected, the losers here may not be very high. But the owner-managers who were planning to sell their only business for considerably more than £1m will no doubt feel aggrieved.
“Also, the fact that the limit drops so markedly and with immediate effect will upset those long-standing family businesses who have worked hard for many years and had been genuinely working through the sale process believing that the 10% tax rate would apply, but were not able to complete their sale before Budget Day.
“This will obviously feel like a negative change for these individuals and could also impact on future retirement planning. Indeed if, as we expect, the excess will be taxed to 20% rather than 10%, this is going to represent a significant extra cost.
“Businesses that were able to complete deals before March 11 may well be breathing a sigh of relief now.”
He welcomed the changes to the research and development (R&D) tax credits, saying that ‘large’ companies, or those that receive certain R&D grant funding, would hopefully be pleased with the slight increase in the tax credit to 13%.
“This will particularly help certain companies in the area that are at the cutting edge in terms of advancements in science or technology,” he added.
“Whilst a higher rise might have been more beneficial, it is at least a positive move for what is already a fairly generous tax relief for qualifying businesses.”
With no post-election tax rises announced in the Budget, as has been the case in the past, he sounded a note of caution about how any additional spend will be funded and whether there are further ‘stealth’ taxes planned in the future, perhaps to be gradually introduced over time.
“There is an Autumn Budget planned later in the year and also the Chancellor is hoping that extra funding will result from the continued targeting of ‘aggressive’ tax avoidance and evasion”, he said.
Simon Denton, pictured left, tax partner at regional accountancy firm Milsted Langdon, which has an office in Bath, also criticised the cut in ER, which he said would not be welcomed by SME owners and raised fears that it may slow down or stop ongoing and future business sales, mergers and acquisitions, as owners considered the additional tax that they may incur.
“Changes to ER had been suggested in the Conservative manifesto, but the immediacy of this cut means that many will see the amount of relief they can receive against Capital Gains Tax (CGT) slashed,” he said.
“This change may mean that business owners, pay significantly more CGT when they come to sell their business or shares, as the effective rate that they pay increases from 10% under ER up to the regular 20% rate.”
However, he also supported the Chancellor’s boost for research and development (R&D) with a huge increase in investment in government-funded R&D projects from £11.4bn to £22bn a year by 2024-25 and the increase in the business R&D expenditure credit from 12% to 13%.
Dominic Bourquin, pictured, corporate tax and corporate finance partner at regional accountants MHA Monahans, which has offices in Bath, Somerset and Wiltshire, said the small and medium-sized enterprises that did so much to fuel UK PLC could take some comfort from the Budget. 
“Given that they are likely to suffer most as the measures to combat the coronavirus take their toll – employees self-isolating, plummeting sales, coping with fixed costs and diminishing cashflows – the Chancellor has produced some pretty quick win,” he said.
“Those self-employed and small businesses will have access to a £7bn support fund, and SMEs with fewer than 250 employees will have 14 days’ statutory sick pay refunded from day one by the Government. This move, of course, helps everyone. Nothing could be worse for the wellbeing of the country than employers encouraging potentially sick staff to clock in as normal.
“Banks will offer loans of up to £1.2m to small businesses and the government will cover losses for up to 80% of the loans. With the Bank of England cutting the base rate from 0.75% to 0.25% just hours before the Chancellor stood up, it’s looking like it could be a good time to borrow.”
