Adviser business owners thinking about succession planning may need to comb through the fine print of Labour's 2024 Autumn Budget.
Within the 166-page Budget document and further associated documentation, the new chancellor Rachel Reeves unveiled several measures that may have a significant effect on an adviser's ability to simply sell up or pass businesses on.
1) Changes to tax rules on liquidations of LLPs
From October 30 2024, there will be new tax rules around limited liability partnerships, which should bring in an additional £5mn in the current tax year, rising to £15mn in each of the years until 2029-2030.
This was hidden on page 116 of the Budget statement, and expanded further in an additional document. Broadly, this measure aims to "increase trust in the tax system by tackling an avoidance scheme".
Effectively the measure ensures that where a member of a LLP has contributed assets to it, then chargeable gains that accrue up to the contribution are charged to tax when the LLP is liquidated and the assets are disposed of to the member, or a person connected to them.
According to the government's most recent statistics, at the end of 2022 there were 52,394 LLPs in the UK. Many advisers have set up their businesses as LLPs - indeed, many of FT Adviser's Top 100 are LLPs.
The new measure means the amount of chargeable gain accruing to to the member is to be equal to the amount that would have accrued (absent section 59A) at the time they contributed the asset to the LLP.
The LLP will be liable in the normal way for gains from that time on their actual disposal of the asset.
2) Changes to business asset disposal relief
BADR, which provides a reduced capital gains tax rate of 10 per cent on qualifying business disposals up to a lifetime limit of £1mn, is under review.
Although Reeves did not announce an immediate rate change, there is an ongoing discussion about tightening the criteria to ensure the relief effectively incentivises what the government calls "genuine entrepreneurs" rather than primarily benefiting higher-income individuals exiting established businesses.
BADR, like investors' relief, offers access to lower rates of CGT. The government has set out changes for business owners showing gradual increases.
The BADR and IR rates will rise to 14 per cent from 6 April 2025, and will match the main lower rate of 18 per cent from 6 April 2026.
According to the Budget documents: "Phasing in the BADR and IR rate increases demonstrates the government’s commitment to a predictable tax system."
It also says this will be protecting "genuine entrepreneurs". The £1mn BADR threshold however will remain, which should be "hugely welcomed by entrepreneurs and private business", according to one commentator.
3) Apprenticeships
Advisers have often considered taking on apprentices, helping to bring new blood into the financial advisory profession. Early indicators from this Budget suggest the government is committed to helping employers support such schemes in the future.
