For most UK businesses 2019 has been a year of frustration. It has been spent hoping for clarity on the future direction of the economy, without it being achieved. Most business owners are fed up with the ongoing uncertainty and disagreements between politicians.
The outcome of the forthcoming general election on 12 December is uncertain and another hung parliament seems highly possible, in which case, will we be any further forward?
Additionally if Sajid Javid doesn’t retain his job after the election then we will have had four Chancellors in less than four years, which does nothing to help achieve consistent tax policy.
Depending on the election result some very different outcomes for the country are possible. With a desire across all parties for government spending to increase after a long period of cuts and spending restrictions it seems quite likely that taxes will increase.
Whilst we have had an Autumn Budget cycle for a few years, the next Budget must surely be in early 2020. Quite when, and the likely measures it contains, will depend on whether we have a change in government, Brexit and who the Chancellor is. Any tax changes are likely to be effective from the next Budget, or 6 April 2020. However, for those considering actions then one might as well focus on 12 December.
With all of that in mind, some actions that clients might wish to consider are:
- Accelerating the payment of bonuses to before 12 December
- Accelerating the payment of dividends to before 12 December
- Crystallising capital gains prior to 12 December to take advantage of current tax rates
- Where possible, accelerating pension contributions in case tax on pension contributions is further restricted and taking pension benefits in case tax free cash is restricted
- Taking into consideration possible restrictions on entrepreneurs’ relief and inheritance tax reliefs, or increases in those tax rates and
- Accelerating succession planning and the making of gifts to children or into trust for fear that taxation on lifetime gifts will become more onerous
One thing is certain, waiting for the outcome of the election is likely to mean there isn’t enough time to plan restructuring so the process needs to start now. It is also important to remain mindful of sensationalised headlines as the campaigning ramps up, so take professional advice and don’t panic into rash actions.
Of course it is also vital to ensure the tax tail doesn’t wag the dog. Acting quickly to take advantage of a perceived tax advantage could have wider implications for those family members working inside and outside of the family business, both financially and emotionally.
We work with clients on a whole host of topics to include devising long term and short term strategies to grow the business, involving all family members in key decision making, and considering ways to safeguard and build family wealth.
Every family business is unique and each requires different solutions to the challenges they face, whether it be the impact of Brexit or too many family members wanting to have a say in how the business is run. Our business review service, Family Business Connect, provides a structured approach to assist family and owner managed businesses access understanding, support and guidance.
To begin to look inside your business with a little more clarity and confidence, now and into the future, get in touch with one of our Family Business advisers at PKF Francis Clark and arrange your initial Family Business Connect review.