THOUSANDS of shopkeepers face losing around £15,000 from the Chancellor’s plan to scrap a key tax relief for small businesses and self-employed workers.
Rishi Sunak is planning to ditch entrepreneurs’ tax relief in next month’s Budget to raise nearly £3billion.
The move would add ten per cent to the capital gains tax bill slapped on the sale of a business.
Figures handed to HOAR by the Federation of Small Businesses (FSB) shows this would hit 10,000 people who own a corner shop, garage or small construction firm when they sell-up for their retirement.
A typical shop selling for £150,000 would lose £15,000 if the Chancellor goes ahead with plans to scrap the relief. A business worth £250,000 would lose £25,000.
It would deliver a major blow to many small business owners who rely on entrepreneurs relief to save for their retirement – in the same way as full-time workers benefit from pensions tax relief.
Experts have also warned that ditching the relief would risk business owners relocating to Ireland, where they wouldn’t pay a penny when they sell-up.
Entrepreneurs relief allows company founders selling their business to pay capital gains tax at a rate of 10 per cent instead of the 20 per cent rate that usually applies to gains of up to £10million.
The FSB on Monday night urged the Chancellor not to scrap the tax relief but instead limit it to sales of under £1million.
FSB boss Mike Cherry said: “Scrapping entrepreneurs’ relief would destroy the retirements of thousands of business owners. The Conservative manifesto committed this Government to reviewing and reforming this incentive, not scrapping it entirely.
“The Conservatives should keep their promises – it’s a question of trust.
“The solution is obvious: keep the relief for the first £1million of a business sale and scale it back at the top end.
“Doing so would save the Treasury more than £1billion and maintain a vital incentive which encourages entrepreneurs to start up, hire and invest.
“A lot of entrepreneurs see their business as their retirement plan. They don’t have the gold plated pensions enjoyed by Treasury civil servants.
“Small business confidence has suffered an unprecedented 18-month slump. Scrapping entrepreneurs’ relief will make a bad situation worse.
“Fundamentally we want to make the UK a more, not less, attractive place to start up a business. If this incentive goes, we risk losing entrepreneurs to other climes.”
Meanwhile more than 150 notable British entrepreneurs have sent a letter to Mr Sunak urging him not to scrap the relief.
Signatories include Carrie Longton, founder of Mumsnet, and Rob Law, founder of Trunki.