During the period of fear, uncertainty and doubt created by the Corona virus the taxman took the opportunity to savagely and surreptitiously cut one of the most useful tax breaks for entrepreneurs and other significant shareholders.
Previously, subject to meeting certain criteria, directors and shareholders could sell their shares and take advantage of the Entrepreneurs Capital Gains Tax Rate of 10% on gains up to a lifetime limit of £10m. A £10m capital gain would only be subject to £1m of taxation. This limit has been renamed and reduced from £10m of lifetime gains to £1m, thus exposing the other £9m of gains to taxes of 20% or more.
While most of us were thinking of how to help our friends, neighbours and relatives, the taxman had other matters on their mind. Namely how to squeeze more money out of the entrepreneurs that are the main drivers of wealth creation through the creation and growth of the SMEs, which in turn are the main generators of jobs and wealth in the UK.
SME refers to Small and Medium Enterprises, defined as companies that meet at least 2 out of 3 of the following:
- Fewer than 250 employees
- Less than £36.2m of annual sales
- Less than £18.1m of gross assets
Above these thresholds, companies would be classified as large companies.