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Tax rules likely to increase ownership changes

The next six months are expected to show an increase in the changes of dealership owners as owner-drivers sell ahead of new capital gains tax relief rules.

This month’s pre-budget statement by Alistair Darling revealed plans to change taper relief on capital gains tax.

Currently, owners who have built their business from scratch are entitled to maximum taper relief after two years of ownership. The result of this is that they only pay 10% capital gains tax when they sell the business. From April next year, they will pay 18%.

The chief executive of one AM100 top ten dealer group told AM: “I suspect there may be a flurry of acquisitions up to April, if owners are thinking of exiting the business they’ll want to sell before the tax increase goes through.”

The change might cause a downturn in deal values after April if private equity investors are deterred, according to Grant Thornton.

The pre-budget statement also announced powers for local authorities to impose a 2% supplementary business tax from April, to help them fund regeneration and infrastructure projects.

Properties with a rateable value of £50,000 or less will be exempted.

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