The Chancellor unveiled his plans to aid economic recovery in the 2021 Budget, and has offered vital support for businesses. So what does the 2021 Spring Budget mean for the business sale market?
Capital Gains Tax (CGT)
Although the Office of Tax Simplification (OTS) had proposed significant changes to Capital Gains Tax that would have negatively affected the business sale market, the proposed changes have not materialised.
The OTS recommendations led to concerns that rates of Capital Gains Tax would increase significantly, to be brought in line with income tax rates. The Office of Tax Simplification also put forward a reduction in the annual exempt allowance from CGT, from £12,300 to between £2,000 and £4,000.
What was the outcome for the business sale market?
The news for business sellers is good, as these recommendations have not been taken up by the Chancellor. This means that the benefit of Business Asset Disposal Relief on qualifying gains are still available to eligible business sellers, up to a lifetime limit of £1 million.
Business Asset Disposal Relief was formerly known as Entrepreneurs’ Relief, and reduces CGT to an effective rate of 10%. Further positive news for those thinking of selling their business is that the annual exempt allowance from Capital Gains Tax has been frozen at £12,300 until 2026.
Government support for businesses
The business sale market has been further bolstered by the Chancellor’s continued ‘on the ground’ support for businesses. The introduction of new grants and extension to existing schemes, including those covering jobs, funding, and business rates relief, provide much-needed assistance.
The Coronavirus Job Retention Scheme (CJRS) has been extended until the end of September 2021 - this provides greater certainty to prospective business buyers that existing workforces will remain stable.
Business rates holiday
The business rates holiday for retail, hospitality, and leisure businesses has been extended until the end of June, after which time business rates will be reduced by two-thirds for a period of nine months.
Non-essential retail businesses can access a one-off cash grant of up to £6,000 to support reopening, with cash grants of up to £18,000 being available for hospitality, leisure, accommodation, gym, and personal care businesses.
Recovery Loan Scheme
CBILS and the Bounce Back Loan Scheme end on 31st March 2021, but the Chancellor has introduced a Recovery Loan Scheme - this will offer confidence to incoming business owners that finance is available if necessary. Funding of between £25,000 and £10 million will be available through the Recovery Loan Scheme.
The reduced rate of VAT for hospitality and tourism businesses has also been extended until the end of September. It will then rise to 12.5% until April 2022.
For more information and guidance on how the 2021 Spring Budget affects the business sale market, please get in touch with our team of experts at Selling My Business. We operate an extensive network of offices around the UK, and offer free, same-day consultations.