Entrepreneurs' Relief review and reform: what changes may Budget 2020 bring?

Individuals who qualify for Entrepreneurs' Relief under the current rules would be wise to consider their options in advance of Budget day on 11 March as changes to restrict the availability of the relief may be announced.

Although it is not clear yet what (if any) changes will be announced – as our earlier Budget 2020 insight noted – the Conservative Party's 2019 General Election manifesto committed to "review and reform" Entrepreneurs' Relief. There have also been calls from some quarters, including the former executive chair of HMRC, Sir Edward Troup, to abolish the relief altogether, perhaps replacing it with a tax relief which more directly incentivises entrepreneurial activity.

It would clearly be welcome if the Chancellor of the Exchequer announced a review of Entrepreneurs' Relief and a period of consultation with relevant stakeholders before making any changes to the relief. However, this cannot be guaranteed and it is worth noting that the most recent changes to the Entrepreneurs' Relief rules – brought into force by Finance Act 2019 – were announced by the previous Chancellor of the Exchequer without consultation in Budget 2018.

It is unusual for significant changes to tax law that are announced on Budget day to actually come into force on that day – unless they are addressing avoidance. Although that possibility should not be ruled out, it is more likely that any changes that are announced will be effective from a later date, possibly with "anti-forestalling" measures to prevent individuals taking any steps on or after Budget day to maximize their entitlement to Entrepreneurs' Relief before the new rules come into force.

Individuals who wish to make the most of their entitlement to Entrepreneurs' Relief under the current rules, in particular any individual shareholder currently in a sale process, may wish to take professional advice as to the options open to them. The simplest way to protect against any change in the rules is, where possible, to secure an unconditional exchange of contracts ahead of Budget day.

If you would like to discuss the implications of any changes to Entrepreneurs' Relief please contact a member of the Osborne Clarke tax team.