CGT hike could lead to ‘flurry of activity’ for investors in Q1

A potential hike in Capital Gains Tax (CGT) is likely to increase the rate of tax for investors and entrepreneurs looking to sell their companies and could lead to a “flurry of activity in Q1”, according to Foresight Group.

The investment group was responding to reports that Rishi Sunak has ruled out a wealth tax for this year’s Spring budget.

The Daily Mail recently revealed that the Chancellor has been presented with plans for a one-off levy on those with assets of more than £500,000, or £1m for a couple, but Sunak had ruled out the suggestion because it “goes against the Conservative party’s aspirational values”. However, the Chancellor is still expected to be considering proposals that would see the Treasury announce a hike in CGT.

Foresight Group director, Claire Alvarez, said that any change to CGT – which is the tax on the profit of any sale of an asset that has increased in value – would have implications for investors and entrepreneurs. She suggested that a “flurry of activity” could be expected in the first quarter of 2021 as a result of the predicted tax change.

“Any proposed change to CGT, which is expected to come into effect in April 2021, is likely to increase the rate of tax for entrepreneurs looking to sell their companies,” Alvarez commented.

“We therefore expect there to be a flurry of activity in Q1 2021, due to a combination of the predicted tax change and recent positive news surrounding a COVID vaccine. The amount of work involved in a sale should not be underestimated, and any shareholders looking to divest their assets will need to act swiftly to allow enough time for negotiations and due diligence.

“Foresight’s pragmatic approach and flexible capital mean that we’re able to move quickly where owners have identified a desire to achieve either a full or partial sale. However, we expect that for many companies now may not be an optimal time to pursue a sale, due to the impact of COVID and uncertainty in the current market.

“We are therefore continuing to commit significant growth capital to businesses looking to invest in their future, and deliver value above and beyond the impact of any potential tax change.”

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