Further to the blog I wrote just yesterday citing the predictions in the upcoming budget, today the Treasury has announced that it is scrapping plans for an Autumn Budget this year because of the coronavirus pandemic. But where does that leave businesses now?
The Treasury has said that now is not the right time to outline long-term plans. With us still in the midst of the pandemic, it does seem like a logical decision to delay any action on recouping the costs of the virus.
However, despite these changes, the facts about MVLs and the caution that business owners must heed remain the same. This delay should be seen as merely a reprieve until the next budget in March 2021. If you are looking to exit your business for retirement in the foreseeable future, it may be best to do this before any future budget announcements are implemented, which could be as early as 6 April 2021. If Capital Gains Tax rates are ultimately changed to bring them more in line with Income Tax rates then this could be costly.
Whatever the future holds, though, the Targeted Anti-Avoidance Rule (“TAAR”) is likely to stay in place. Therefore, if you are wishing to exit your business for retirement, make sure this is definitely the long-term decision. If you wanted to re-start within two years of closing your business, HMRC has the power to reclassify capital payments as income payments, if it thinks that the distribution has been set up for the purposes of gaining a tax advantage.
As things develop, we’ll keep you updated. But for now it seems we all have a little breathing space. I’d recommend this as time to make careful decisions about the future, with that possibility of higher rates potentially coming in next year.