Chancellor John Healey is reportedly planning major tax changes that will affect family businesses ahead of his first Budget. These proposals could nearly double the tax burden on business owners who transfer their companies to their children, according to reports from the Telegraph and City A.M.
Proposed Tax Changes
Right now, business transfers can be set up to attract capital gains tax (CGT) at a lower rate. Healey is considering changing this to impose income tax on these transfers. This could lead to a big increase in tax bills for business owners. Tim Stovold, head of tax at Moore Kingston Smith, warned that if these changes are made, it would complicate passing down businesses and could deter investment in the UK. "If the proposals in the consultation are implemented as law, a number of transactions used to return value as a capital gain to a retiring generation will become much more difficult or impossible," he said.
Economic Implications
Advisers have warned that this move could threaten the survival of many family businesses and discourage new ventures. Andy Oury, a tax partner at Oury Clark, called the potential changes a "disaster" that would hurt the UK's appeal as an investment destination. The Treasury aims to raise hundreds of millions from these changes, building on previous measures that are expected to generate £300 million each year through inheritance tax (IHT).
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The proposed tax changes could hurt family-run businesses, leading to higher operational costs and less investment appeal. This may affect sectors that rely on small and medium enterprises, especially in the UK. Investors will be looking for more details in Healey's upcoming Budget announcement, expected later this month.
Based on reporting by: cityam.com