Brokers warned over earn-out Capital Gains Tax trap
Brokers rushing to sell their businesses before Business Asset Taper Relief expires on 5 April 2008 may still be caught by the increase in Capital Gains Tax (CGT) announced in the Pre-Budget statement if they plan to use an earn-out agreement warns CLB Littlejohn Frazer.
“This hike in the capital gains tax payable on disposal of business assets is triggering a mass exodus as brokers aim to sell up before the 5 April 2008 deadline to minimise their capital gains tax liabilities, but many will be caught out by the structure of the deal,” explains Chris Riley a tax manager with accountancy firm, CLB Littlejohn Frazer.
“Broking firms are typically sold using an earn-out agreement, and payments under such arrangements will probably be made past the new CGT rate
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