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UK Budget Fears Push Owners to Close Firms to Avoid Tax Hikes - BLOOMBERG
(Bloomberg) -- Thousands of solvent UK business owners are winding up their companies, allowing them to avoid an expected increase in levies on entrepreneurs in the budget.
The number of so-called members’ voluntary liquidations this month exceeds 1,600, according to notices filed to The Gazette, where business closures in the country are advertised. That’s already more than double the level for the whole of October last year.
The spike comes as Chancellor of the Exchequer Rachel Reeves considers cutting a capital gains tax break known as Business Asset Disposal Relief in her spending plan on Oct. 30. Entrepreneurs currently pay a reduced tax of 10% on profits they make from the sale or liquidation of their companies under the policy rather than the standard 20% charged on higher-rate taxpayers.
“Concerns around the anticipated restriction or removal of business asset disposal relief in the budget, which has long been mooted by the government, is the main driver behind a lot of these MVLs,” said Julie Palmer, a partner at corporate recovery specialist Begbies Traynor.
Any change to the relief is expected to be part of a wider shake-up of capital gains tax as Reeves seeks to balance the country’s budget. The Chancellor has ruled out increases to several other key levies, leaving her with a limited range of options to raise the £40 billion that government officials say is needed to fill a budgetary hole left by the previous Conservative administrationand fund Labour priorities.
Amanda Staveley, the financier and former director of Premier League club Newcastle United, said she recently liquidated one of her businesses because of the threat of higher CGT.
The Treasury did not respond to a request for a comment.
The use of MVLs still appears to be accelerating. The number of liquidators appointed to such closures surged about 238% to 513 in the week ended Oct. 18, helping to drive a 51% increase in insolvencies week on week.
“We have seen an increase in liquidation requests in the last couple of months since the speculations about the changes that the new budget may bring started circulating,” said Vesna Sowden, head of company secretarial at Blick Rothenberg Ltd.
“These were mainly driven by the company owners’ concerns about the possible changes in the inheritance tax and the increase in capital gains tax.”
This story was produced with the assistance of Bloomberg Automation
--With assistance from Immanual John Milton.
