Business Partnership Corporate

Author: Chris Green

A Budget for the young generation – of entrepreneurs?

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After the headlines and sound bites comes the task few of us would envy – picking through the fine details of Chancellor George Osborne’s eighth Budget.  The proposed sugar tax predictably grabbed the tabloids’ attention but many of the more heavyweight commentators have chosen to focus on the implications for Britain’s small businesses including newsagents in Nuneaton, corner shops in Barnstaple and hairdressers in Leeds.

Most agree that small businesses are the big winners following the announcement that 630,000 small businesses will pay no business rates at all from 2017.

The annual threshold for 100 per cent relief on business rates for small firms will rise from £6,000 to £12,000 and the higher rate from £18,000 to £51,000. Mr Osborne claims the reduction will save small businesses some £7 billion per year.

The Chancellor didn’t hang around to introduce a change to commercial stamp duty, which came into force at midnight on March 17. The rate is now nought per cent on purchases up to £150,000, two per cent on the next £100,000 and a five per cent top rate above £250,000. There is also a new two per cent rate for high value leases with a net present value above £5 million.

Also of significant interest to SMEs is the news that the self-employed will no longer have to pay class two national insurance contributions, which will be abolished from April 2018. Businesses of all sizes will also be relieved that there is no increase in fuel duty.

At Business Partnership, we believe the increase in the small business rate relief threshold will have a significant impact on the profitability of small retail businesses, which in turn will help business owners to realise a higher value when they come to sell their business.

Long term confidence regarding small business rate relief will breed confidence in the High Street which will improve the marketability of these types of businesses. In recent years they have become less attractive to new buyers, especially younger generation buyers.

A reduction in corporation tax to 17 per cent by 2020 will allow small businesses to retain more profit which provides cash flow. This in turn can be reinvested to achieve growth and enhance their value on sale.

The Chancellor has looked after small businesses generally which will make the sector more attractive at the point of sale. This will hopefully encourage young investors to start or purchase a business as an alternative to employment.

If you are considering buying or selling a business, contact Business Partnership’s team of experts, who are based across the UK.

Selling a business? Be aware of possible tax changes

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The Chancellor’s Budget and Autumn Statement always contain plenty of substance for writers and analysts from health to housing and the headline grabbing U-turn on tax credits.

However, the devil is in the detail and one proposed measure which may have slipped your notice in 2015 among all the numbers and percentage points is one affecting Entrepreneurs’ Relief.

If you are selling a business, an important factor will be whether or not you will qualify for the scheme, which is open to directors who own five per cent or more of a company.

It allows them to enjoy a 10 per cent tax rate on capital gains up to a lifetime limit of £10 million, which compares with the 28 per cent of tax payable without the relief.

If you are selling all, or even part, of your business, the following must apply:

  • You are a sole trader or business partner;
  • You have owned the business for at least one year before the date you sell/close it;
  • You sell or dispose of your business assets within three years after selling or closing the business

Selling shares? Then the following criteria must apply for at least one year before they are sold:

  • You have at least five per cent of the shares and voting rights
  • You are an employee or director of the company or one in the same group
  • The company’s main activities are in trading

George Osborne and his Treasury team are concerned that members of management teams who do not pass the five per cent “personal ownership” test are teaming up with other individuals to form a management company. This shell would own at least 10 percent of the trading company nominal share capital, allowing for the same rate of tax relief as Entrepreneurs’ Relief under the rules relating to joint ventures.

The Chancellor is keen to take steps to ensure relief was “only available to those selling genuine stakes in businesses” though tax experts have warned that closing the loophole could deter would-be investors from backing young companies.

A consultation document on company dividends has been published by HMRC. The closing date for comments is February 3 and the legislation under the Finance Bill is planned to take effect from April 6.

Therefore, it is best to be prepared. If you are considering a solvent liquidation to take your money out of the company at 10 per cent tax, you may wish to do this before April 2016.

Remember, if you are thinking of selling a business, you should always seek professional advice as tax rules do change.

Do you really know the value of your business?

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Whether you’re planning to sell your business or would like it valued for a potential sale at a later date, it all hinges on one key question – why would anyone want to buy it?

Imagine the impact on your decision if we could show you how to make your business significantly more appealing than the average company on the market.

Business Partnership Corporate has analysed 20,000 businesses – and those with a Value Builder Score of more than 80 out of a possible 100 receive offers that are 71 per cent higher than those with a lower score.

It is simple to start. Just complete our free and confidential Value Builder™ survey and you will receive a Value Builder Score™ out of 100 with instructions to interpret your results.

Understanding why your business is valuable may require detailed explanation so a local Business Partnership Corporate advisor will provide a comprehensive review of your report.

The result – you will be better placed to decide if you wish to grow or sell your business.

You may wish to sell immediately to liberate your time, reinvest in a new venture or release family wealth.

Or you may wish to consider implementing longer term strategies to increase the value of your business whether this is changing the business structure, driving growth, implementing new systems and services or the recruitment, retention and training of staff.

Assessing your score will provide an overall picture and help shape your vision for the future of your business.

To see how Value Builder works, watch our short video.

One of our partners will contact you or to Get Your Score click here.