Over a quarter of small business owners are unaware that transferring business assets could lead to a heavy Capital Gains Tax (CGT), according to a new report.
The report, by law firm Thomas Eggar, reveals that 26 per cent of owners are unaware of the tax, indicating that many are failing to keep themselves informed over tax laws.
Part of a mountain of tax regulation, Capital Gains Tax applies when the owner sells fixed assets, including property or shares in the business.
Small businesses trying to navigate through the system are hindered further by annual changes that can prove broad and subjective in their interpretation and can hide potential tax breaks.
According to the Inland Revenue, capital gains tax from individuals and businesses raised £2.3 billion out of total tax receipts of £151.2 billion in 2002-2003.
Business lobbies have consistently sought to abolish the tax with many branding it as ineffective and just another example of over regulation on the government’s behalf.
David Bird, partner at Thomas Egger, said: “The sale of a asset by an individual, whether it is the company’s shares or the disposal of an unincorporated business, will generally be subject to CGT on the increase value of the shares or assets.
“There are currently generous tax reliefs available, which can potentially reduce the effective rate of CGT to ten per cent, as long as strict conditions are satisfied.”
