The FT is reporting this morning that those entrepreneurs who chose to freeze their businesses in a trust, thus enabling them at a future date to take advantage of the previous ten per cent CGT regime, might now be in schtuck.
It’s all fairly complex, but essentially here’s the issue: the Revenue considers a disposal of a business to be "when an unconditional contract is entered into" – in other words, not an actual transfer of contracts. Spotting this, smart tax advisers recommended to their clients that they should sign an unconditional agreement to sell their business to a trust (thus locking in at the ten per cent rate), contingent on finding another buyer.
However, as the economic downturn has set in and the likelihood of a sale on has diminished, so too has the potential for tax pain. If an entrepreneur had actually signed on a sale to a trust (and now cannot shift the business), he or she is staring at a big tax bill – and no sale to pay for it.
It’s not yet clear how many entrepreneurs this could affect, but be prepared for howls of anguish if it does.
