Entrepreneurs who sold their businesses in 2005/06 for paper have no idea what capital gains tax they should be paying because of a lack of guidance on how to treat purchases paid for with loan notes.
Brief notes published by HM Revenue & Customs on the new Entrepreneurs' relief do not say whether they will be able to claim the new relief when cashing in their earn-out rights after 5 April.
'HMRC will not confirm if deferred gains attached to loan notes will qualify for the new Entrepreneurs' relief. We cannot advise loan note holders whether they should elect to crystallise their taper relief or wait and claim for the new Entrepreneur's relief instead,' said PKF tax partner Peter Harrup.
It is common practice for business-owners who sell-up to receive payment as an 'earn-out' or deferred payment, and the option is available to pay CGT immediately or wait until the notes are cashed in.
The situation leaves thousands of entrepreneurs with less than a week to sort out their affairs ahead of the self-assessment deadline on 31 January.
The draft legislation is not expected until mid-February when the election deadline will have passed.
HMRC's Capital Gains Tax Team has said it cannot comment on the issue until the full rules are published.
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