Businesses seen to accelerate exit plans ahead of October Budget

Almost one in three (29%) UK business owners have brought forward exit plans over the last 12 months ahead of the Budget later this month (October 30) from the new government, according to new research from professional services firm Evelyn Partners.

It found 23% of the 500 business owners with turnovers of more than £5 million surveyed by Evelyn Partners who had fast-tracked their exits in the last year had done so because of worries about an increase in capital gains tax (CGT).

READ MORE: Business confidence among South East firms fell in October

Also, 20% had brought forward business exits over the past 12 months because of fears of potential cuts in inheritance tax (IHT) reliefs, which could make it more costly to pass businesses to the next generation.

"As the countdown to the Budget on October 30th ticks away, we have been contacted by an increasing number of business owners worried about what the Chancellor will do to CGT and IHT," said Laura Hayward, tax partner at Evelyn Partners.

"The fact that more business owners have fast-tracked their exit plans in the last year compared to when we conducted similar research 18 months ago tallies with our own anecdotal experiences," she added.

"As opinion polls increasingly suggested a change in government and the consequential potential for tax changes was becoming more likely, an increasing number of business owners have got in touch with us to have conversations about business exits."

Hayward noted that the business environment had already been tough in recent years after the pandemic and against the backdrop of cost-of-living pressures and high inflation.

"Add to that the potential for unfavourable tax changes in the upcoming Budget and it’s completely understandable that some are hoping to realise the gains of their successes sooner rather than later.

"Owner-managed businesses are the beating heart of communities up and down the country, and they need to be given incentives to take risks and create the jobs that will stimulate much-needed economic growth."

Of businesses currently working towards an exit, family succession (22%) is the most popular strategy followed by establishing an employee ownership trust (16%).

"Speculation is rife that the Chancellor will curtail Business Relief which can help to soften burdensome IHT liabilities and we have had conversations with many business owners who want to fast-track succession plans while this valuable relief is still available," added Hayward.

"Setting up employee ownership trusts has been gaining ground as an exit strategy for business owners in recent years, so it’s no surprise to see these score highly in the research. Setting up an employee ownership trust can be a faster process than going to market, while at the same time giving business owners greater control of the valuation of the business," she added.

The UK Government has ruled out increasing the main rate of corporation tax above 25% and has pledged to freeze headline rates of VAT, income tax and NICs in the Budget.

But the Treasury has remained tight-lipped on the outlook for CGT rates and IHT reliefs, as well as the tax rules around workplace pensions.