MVL/ER again - CIOT rumours that it will be removed

[ChimpMaster]

Met my contact from CIOT yesterday and he seemed adamant that the Tories will be getting rid of ER. He didn't have any details really; it was just a casual conversation and I don't know much inside knowledge CIOT really has.

My thoughts were that the government would review it (as they suggested) and perhaps water ER down or make it more difficult to claim.

Timing is the other thing. Would the chancellor announce abolishment of ER in the Feb budget, or just a review? And if so, when would he implement any changes - in the Oct budget? (if there is to be one)

I will of course chase for more info.

Would be good if anyone else here has any further insights into this.

[jamesbrown]

I doubt anyone has any particular insight, including the CIOT.

All options are probably open from reducing the lifetime limit to tightening the qualifying conditions to removing the relief altogether. The only thing signaled was the review (in the Tory Manifesto).

The details of any change are not likely to get signaled long in advance for obvious reasons.

I'd be surprised if ER is still around in a year or two in a form that would be open to contractors, but I also would've said the same thing two years ago.

If you have a long-term plan that assumes you'll get it, I think it's safe to assume that now is the time or perhaps even too late.

[AR Tax]

Met my contact from CIOT yesterday and he seemed adamant that the Tories will be getting rid of ER. He didn't have any details really; it was just a casual conversation and I don't know much inside knowledge CIOT really has.

My thoughts were that the government would review it (as they suggested) and perhaps water ER down or make it more difficult to claim.

Timing is the other thing. Would the chancellor announce abolishment of ER in the Feb budget, or just a review? And if so, when would he implement any changes - in the Oct budget? (if there is to be one)

I will of course chase for more info.

Would be good if anyone else here has any further insights into this.

The Conservatives in their manifesto announced entrepreneur's relief would be reviewed and reformed because it hasn't delivered on its objectives.

I think what the Conservatives are trying to say is that it is not really boosting entrepreneurship/business. I think they are worried it is reducing their tax take.

As per their manifesto, I expect them to review it (probably this year) and then announce their reform (probably in the October 2020 budget). Potentially they could make their results effective from October 2020 rather than wait for 6 April 2021. I don't think there will be any changes from now - September 2020 (maybe beyond).

I believe that they will stop entrepreneur relief claims when a company winds up. In other words, they may want to target it for when a business is sold as a going concern to an unconnected third party. I don't think the review and the reform of ER (as per the manifesto) will result in it being abolished for the whole country (although it may effectively end up being abolished for the contractor population on liquidation).

Even if it is abolished for the whole country (or just for liquidations) distributions from liquidations should still qualify for the 20% capital gains tax rate (which is better than the 32.5% dividends tax rate) assuming you don't fall foul of other rules, e.g. the TAAR on distributions from winding up events.

At the moment, we can only speculate.