Business and buy-to-let owners act on CGT fears

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Business owners looking to sell their companies are rushing to complete transactions ahead of the general election, several advisers said, as fears grow around potential increases to capital gains tax and the limitation of tax reliefs if Labour wins.

Chris Etherington, partner at accounting firm RSM UK, said many who had already planned to sell their businesses were trying to push through transactions this week.

“People are seeing the general election as a bit of a deadline,” he said. “They are trying to get deals done and trigger [capital gains tax] liabilities now. They are concerned that any future changes could be retrospective or subject to anti-forestalling measures.”

Tim Stovold, partner at accountants Moore Kingston Smith, said: “If people were trying to sell their business, there’s a big push to get that done pre-election or soon after the election.”

He had been supporting one business which was going to implement a “very quick” management buyout so that the founders “could sell their shares to take some money out at a low tax rate”, he added.

Labour, which has a strong lead in the polls, did not include any plans for CGT changes in its manifesto, but leader Keir Starmer has refused to rule out reforms. Figures released by HM Revenue & Customs this week estimated that a 10 percentage point rise in CGT rates would result in a £2bn loss to the Treasury in the 2027-28 tax year.

Ceri Vokes, partner at law firm Withers, said that her firm had seen a surge of inquiries from people worried about CGT increases over the past couple of weeks. Prior to that, most of the demand had been from non-doms looking at their options.

British domiciled business owners have also been concerned about a clampdown on inheritance tax relief on business assets.

“Among the ultra high net worths that I advise, that’s causing significant anxiety,” she said. “They’re in the bracket where a lot of their wealth has come from a very successful business that employs a lot of people. The idea that it could be subject to 40 per cent inheritance tax is really unthinkable.”

Individuals were considering transferring business assets to younger generations now, to take advantage of the rules that mean gifts made at least seven years before the donor’s death are free of IHT. Some have looked into transferring business assets into trusts or company structures.

Estate agents have also reported an uptick in property investors, particularly buy-to-let landlords, seeking to accelerate the sale of properties to avoid a potential CGT increase.

TwentyCi, a consultancy which analyses listings and advertised properties nationwide, found there were 28,000 rental homes for sale in the month to June 26, double (100.6 per cent) the figure for the same period last year, and 27 per cent higher than in May.

“We have observed a dramatic rise in the percentage of new properties coming to market for sale that had [previously been available] for rent in the three years prior,” said Colin Bradshaw, chief executive of TwentyCi. “This would indicate that landlords are selling their properties.”

Nicholas Vaughan, head of residential property at Withers, reported there had been a fivefold increase in the number of BTL sales made by his clients this year. Most of the sales had been made by overseas investors predominantly from Italy and Asia.

“There is no doubt that we’ve seen an uplift . . . in the number of landlords selling,” said Matthew Thompson, head of sales at estate agent Chestertons. But a number of factors have been weighing on landlords for several years, such as higher interest rates and tax changes that reduce their profitability. Thompson said mortgages, tax and the likelihood of tighter tenancy regulations were currently the main issues swaying landlords.

However, Clare Munro, adviser at Weatherbys Private Bank, said that while many landlord clients were worried about CGT rates going up, they would hold on to their properties as they were concerned about crystallising gains unnecessarily if the tax rate failed to rise.

“I think it’s very difficult for people who are sitting with asset gains trying to work out what to do,” she added.

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