LIVERPOOL’S corporate lawyers are experiencing double the usual volume of transactions due to changes in capital gains tax soon to take effect.
After April 5, those selling a business will be charged a set rate of 18%, marking the end of the 10% rate charged for business assets held for at least two years.
The difference will amount to six figure sums in the majority of multi-million pound transactions.
The changes were announced in the Chancellor’s pre-budget report last year, and confirmed in last week’s Budget speech.
Denise Walker, a corporate partner at Brabners Chaffe Street, said: “The CGT changes have resulted in a very busy period, with firms across the city working at full capacity for a number of weeks.
“Vendors want to sell before April 5 because if they leave it longer, a large portion of any profit will be lost to the Treasury. I would say that across Brabners Chaffe Street’s offices, we have twice the usual amount of deals going through.�
The head of the corporate department at the Liverpool office of Mace & Jones revealed that the team had been working evenings and weekends to cope with clients eager to sell before the deadline.
Ian Hodgkinson said: “There has certainly been a lot of scrambling around and we have been making contingency plans for people, such as working weekends which we very rarely have to do.
“This is probably the biggest tax-driven deadline event of this sort that I can remember.�
The situation has been exacerbated in some cases by reported delays at HM Revenue & Customs who, according to some accountants, are overburdened with requests for business sale approvals. Clearance applications, in some cases, will not be granted before the deadline.
In last week’s budget, Chancellor Alistair Darling confirmed that an ‘entrepreneurs’ relief would be introduced with the changes, meaning that the first £1m of an individual’s first transaction would be taxed at the original 10% rate.
He added that the relief will benefit more than 80,000 businesses and investors in the coming months, with 90% of deals continuing to be taxed at 10%.
However, this concession is unlikely to be much consolation for the market, according to David Maples, partner in the corporate team at Brabners Chaffe Street.
He said: “With the entrepreneurs’ relief essentially being a ‘one off’, I do not see this aspect making a lot of difference. Only time will tell whether there will be a drop off in the number of corporate sales following these changes. It might be the case that some business owners decide to wait before selling, perhaps in the hope that a possible change of government might revert to the original rate.�