A recent report from the Office of Tax Simplification (OTS) laid out a number of potential changes to Capital Gains Tax (CGT) which would make the tax payable by practice owners, on practice sales more punitive, and the Chancellor of the Exchequer Rishi Sunak must now decide if he wants to implement any of these changes.

Public finances have been hit hard by the Covid-pandemic and it is no surprise that the Treasury is looking for ways to balance the books. Veterinary practice owners considering a sale of their practice are urged to act now to avoid being hit by potential changes to Capital Gains Tax in the Spring Budget.

Capital Gains Tax (CGT) is payable on the sale of all businesses and Entrepreneurs’ Relief used to be a very generous allowance, and whilst it is still a low rate of 10%, this now only applies to the first 1m of sale proceeds only and it has since been renamed Business Asset Disposal Relief. Beyond that, an individual is currently allowed 12,300 of gains each year before paying CGT at either 10% for Basic Rate taxpayers or 20% for Higher or Additional Rate taxpayers. The proposed changes could bring those rates in line with whatever rate of Income Tax is paid by individuals, 20% for Basic Rate taxpayers and even as high as 40/45% for Higher and Additional rate taxpayers.

The effective doubling of the tax rate could have a marked impact on future retirement plans for practice owners in the UK who should use the OTS review as an opportunity to think carefully about their affairs and seek professional advice if needed.

Martin Caton, veterinary surgeon and acquisition specialist for IVC Evidensia said,

“Practice valuations are still robust, and this may be the last chance for practice owners who are considering selling their businesses to be able to benefit from both a high sale price and a generous tax position. IVC have continue to welcome practices into the group throughout these turbulent times offering owners a secure future for their practice, their clients and most importantly, their employees.”

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