Anyone selling a business to their employees is expected to benefit from tax relief on their capital gains (CGT) from 2015.
One of many business-friendly measures announced in today’s Budget, the introduction of CGT relief will apply where a controlling interest is sold into an employee ownership structure.
Consultation on the measure, which will accommodate work undertaken by the Department for Business, Innovation and Skills (BIS) to develop an ‘off the shelf’ employee-owned company model, will pave the way for the measure's inclusion in the Finance Bill 2014.
Chancellor George Osborne also announced a limited extension of capital gains tax relief from April.
Introduced in last year's budget, the scheme grants investors a 50% tax relief on capital gains accrued in 2013-14 when they reinvest those gains into seed companies in either 2013-14 or 2014-15.
Patrick Reeve, managing partner at Albion Ventures LLP, one of the largest independent venture capital investors in the UK, welcomes the new tax relief.
Patrick Reeve, managing partner at Albion Ventures LLP
“Abolishing CGT on the sale of companies to employees provides a much needed incentive to unlock hidden talent within UK companies," he says.
"By securing the Government’s stamp of approval we expect to see a significant increase in management buy-outs over the coming months as awareness of this route to growth begins to spread."
Commenting on the announcement that stamp duty on growth markets, he adds: “AIM is the magnet that attracts smaller companies towards venture capital funding. Yet in recent years AIM has lacked the necessary power to fulfil this role effectively, but the Chancellor’s announcement to scrap stamp duty on growth markets such as AIM provides a much needed fillip.
“This Budget was mindful of the role that growth companies are playing in advancing the UK’s progress down the road to recovery.”
Meanwhile, publicans will raise a toast to the Chancellor after he relented in the face of lobbying from the industry to scrap the beer-duty escalator. In fact, he went one step further, actually cutting beer duty by 1p.
The news is the second boon in a month for the alcohol industry after David Cameron abandoned plans for a minimum alcohol unit-price, much to the chagrin of the British Medical Association.
Looked at another way, however, jettisoning proposals for a 45p minimum threshold could be portrayed as a disappointment for the licensed trade. The proposals really affected only the off-trade, forcing up the price of cheap supermarket booze and narrowing a gulf between pub and off-licence prices.
Until 2011, more alcohol was consumed in licensed premises than at home. The trend towards home drinking - surely not coincidentally - correlated with a widening disparity in on- and off-trade prices, with the squeeze on living standards only accelerating the trend.
The abandonment of the beer duty escalator should at least ensure that gulf doesn't widen further still.