As widely expected today’s Budget did not involve any great surprises. It was full of statistics spanning the duration of this Parliament, electioneering and a recap of items previously announced in the Autumn Statement. There were a few announcements relevant to Private Equity:
- With immediate effect changes are being made to the entrepreneurs’ relief rules to limit the ability to claim the 10% tax rate on disposals of shares in joint venture companies or in partnerships of which a company is a member. This is expected to block the use of “Mancos” which enable members of management teams holding less than a 5% interest to pool those interests together in a Manco which holds a stake in the trading group. The changes will affect existing structures and any members of management teams involved in such arrangement are likely to need to take action to preserve their entitlement to entrepreneurs’ relief.
- Also with immediate effect there is a tightening up of the rules which allow entrepreneurs’ relief to be claimed on the disposals of assets used in trading businesses. This may affect some individuals who are looking to claim relief on the disposal of properties rented to their trading entities.
- Not an announcement as such, but Employee Shareholder Status survived the Budget. However, it is still widely expected that this may be withdrawn sometime after the election, so the opportunity to implement it may still be limited.
- The continued focus on avoidance continues with a number of measures previously announced such as the diverted profits tax being confirmed for implementation in the Finance Bill due out next week.