Some say that lockdown is the ideal time to learn a new language, pick up a new skill and generally become a more well-rounded (or was that rounder?) person. In this spirit, it is thought that hundreds of fledgling businesses may arise from the pandemic, but how will they fare in comparison to the entrepreneurs before them?

From a capital gains tax (CGT) tax perspective at least, the landscape is a lot less generous. Before 6 April this year, business-owners could (subject to certain conditions) benefit from “Entrepreneurs’ Relief” (ER), a CGT relief that reduced the top CGT rate of 20% to 10% when an entrepreneur disposed of his or her business on up to £10million of gains over his or her lifetime. The aim was to encourage enterprise, giving innovators the reassurance that they could enjoy the vast majority of the fruit of their hard work. However, in the March Budget, the Chancellor announced that the ER lifetime limit would be slashed to £1million, and ER was rebranded “Business Asset Disposal Relief” (BADR).

Shortly before the General Election, there were rumblings that ER would be abolished altogether, so this rebranding and reduction in the lifetime limit were considered a welcome reprieve, although potentially a step toward the relief’s abolition. After all, the eventual scrapping of a tax relief on the disposal of “business assets” sounds a lot better than scrapping a relief on “entrepreneurs”. However, less than two weeks after the Budget, the UK went into lockdown, and a swathe of tax increases and the abolition or reduction of many tax reliefs is predicted as the Government attempts to recoup the debts it is incurring in dealing with the pandemic.

What then for a Government in dire need of funds but which must surely encourage enterprise? Prior to the pandemic, bodies such as the Institute for Fiscal Studies and the Association of Accounting Technicians had questioned whether ER actually incentivised entrepreneurs to start or grow their businesses.  The implication is that serial entrepreneurs, who benefit the most from reliefs such as ER/BADR, do so out of passion and drive entirely apart from any thought of the tax they would pay on an eventual exit. In essence, entrepreneurs just cannot help themselves – it is in their bones.  If this remains the prevailing view, it seems likely that BADR will be kept under review and the more cautious business-owners should consider locking in this relief if they can.