Emergency Budget - Less than a month to go

On 22nd of June there will be an emergency Budget.  It seems extremely likely that CGT rates will rise from 18% to 40% or perhaps even 50%. We anticipate that these higher rates may not apply to "business assets".  We are eagerly awaiting clarification of what is meant by this term.  One possible option for the Government is to adopt the taper relief definition and, if this approach were to be adopted, then the following types of assets could be subject to these new high rates:

• Second homes, buy- to let properties
• Fine art collections;
• More than 10% shareholdings in investment companies;
• Shares in listed trading companies where the shareholder is neither an officer nor an employee of a group company and also not the holder of more than 5% of the voting rights.

Where practicable, the obvious solution is to sell these types of assets before 22 June 2010.  If this proposed rate change is implemented on the same basis as most other rate changes have been implemented, then exchange of contracts is sufficient and it will not be necessary to complete the contract before 22 June 2010.  Do remember, however, that conditional contracts do not fix the date of disposal until the condition is satisfied.  Advice should be sought on whether a contract is conditional or not.  External events, such as obtaining finance, planning permission or a landlord's approval are likely to be conditional.

With less than a month to go, exchanging contracts on sale with a third party may not be possible but there are other solutions to trigger a disposal date before 22 June 2010.

If you would like to discuss this further then please contact: Patrick Harney, Kelly Noel-Smith or Elizabeth Small.

Elizabeth Small