Entrepreneurs who sold their companies to trusts to avoid a hefty CGT bill following the introduction of the new 18% rate could face a 'nightmare scenario' of a huge tax bill but no cash to pay for it, advisers have warned.

Many business owners put their companies into trusts in agreements that depend on a buyer later coming in for the business, the Financial Times reported.

But there are fears that if a buyer does not materialise, a CGT bill will still follow but there will be no cash to pay for it.

'The Inland Revenue might well consider that you have sold a company to your trust and then effectively bought it back by tearing up the unconditional sale agreement,' the FT quoted a Big Four adviser as saying.

Stephen Herring, a partner at BDO Stoy Hayward, says that about 200 businesses were sold to trusts ahead of the CGT changes.

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