Despite the last-minute introduction of Entrepreneur's Relief, new capital gains tax rates are set to hit many owner-managed and family businesses, unless they take action now, according a Midlands solicitor.
Amanda Elwell, an associate in the private client team at Black Country law firm George Green, says that rather than rushing to sell businesses and losing profitable assets to avoid the higher rate of CGT, business owners should consider setting up a trust.
"From April 6 CGT becomes a flat rate of 18 per cent, an effective hike of 80 per cent for business owners who could benefit from full business asset taper relief of 10 per cent.
"Although the new Entrepreneur's Relief offers to retain a 10 per cent tax band for the first £1 million, many business owners will still lose out," said Ms Elwell, who is based in George Green's Cradley Heath offices.
"Indeed former owners who have already disposed of business assets and accepted loan notes as consideration in anticipation of utilising business asset taper relief, will still be caught by an 18 per cent flat rate charge post April 6.
"Gifting shares into a family trust or selling assets to a trust before then, provided the assets have been held for a minimum of two years means that the CGT liability will be paid by the trust at 10 per cent, rather than at the new flat 18 per cent rate.
"The trust can then be managed tax efficiently to benefit whomever the trustees wish. But setting up a trust can also provide a higher level of asset protection for a family business, for example not allowing share ownership by non-family members, as well as being an important tool in succession planning, ensuring a safe transfer of the business from one generation to the next.
"Business owners could also consider establishing a lifetime settlement as a flexible way of protecting assets and preserving wealth. They come in various forms and can be used not only to mitigate CGT but also inheritance tax."
Meanwhile UK companies transferring or selling operations abroad face a further piece of red tape, as a result of a recent Employment Appeal Tribunal decision, according to a Midlands lawyer.
Tim Lang, partner and head of employment at George Green, says that TUPE 2006 regulations, designed to safeguard the employment rights of employees when their employer was taken over, or their jobs transferred, or outsourced, can now be applied anywhere in the world.
"The Employment Appeal Tribunal determined in a case concerning the relocation of a curtain factory in Tamworth to a new base in Israel, that the TUPE regulations could apply," said Mr Lang, who is based in George Green's Cradley Heath offices.
"Previously it was thought that application of these regulations might just be limited within the UK or just to countries in the European Union, but this ruling states that the fact that the business was originally based in the UK is sufficient to give the UK courts jurisdiction over the transfer wherever that may be.
"The practical result of the decision is that a UK employer in this position must be very careful about making redundancy dismissals as they may be automatically unfair due to TUPE and may face a liability for failing to inform and consult its workforce.
"With increasing numbers of Midlands businesses being targeted by overseas-based companies, particularly those from India and the Far East, both parties will now have to take into account the implications of the TUPE regulations on their deal, take specialist advice and ensure that appropriate warranties and indemnities are in place."