The managing partner of London-based financial services consultancy Harrison Spence said large advisory firms on the acquisition trail were offering solutions to help vendors qualify for 10 per cent entrepreneurs’ relief on their capital gains tax bills to make sales more attractive.
He said: “Many financial advisers are set up as limited partnerships, and the owners can come in for a shock when selling as they assume they qualify for 10 per cent relief on CGT, when in practice they do not. Instead they are liable for the 28 per cent marginal rate of corporation tax on the sale value.”
The key distinction that should be made is between selling assets, which do not qualify for relief, and selling equity, which can and should qualify for relief.
Mr Spence added that while acquirers in the past would only buy assets, triggering large tax bills that were often an obstacle to a sale, they were now happy to consider more tax-efficient solutions, including buying equity stakes in firms and even paying the vendor’s tax bill.
Adviser view
Dominic Rose, acquisitions and sales director of national acquirer and wealth manager Bellpenny, said: “We do not take this view when we acquire firms, and believe that sellers need to take appropriate tax measures themselves before going down the sale route.”
