What the Autumn Statement means for Mergers and Acquisitions
EMC Corporate Finance
EMC is a top 20 UK business advisory and corporate finance firm based in the South East and London
Today the Chancellor, Jeremy Hunt, presented his first Autumn Statement. The headline grabbing spending cuts and tax rises were well trailered, but the details, now that they have been revealed, do not appear to have met the spin but may well accelerate M&A in the short term.
Unexpectedly in his speech Jeremy Hunt did not tamper with either the rate of Capital Gains Tax ("CGT") nor the Business Asset Disposal Relief. He did reduce the annual exemption amounts but, in the world of deals, this is somewhat immaterial. He did increase impact of tax on both earned income - by reducing the level at which the 45% rate kicks to ￡125,140 - and unearned income by all but removing the dividend tax credits.
So why should this accelerate M&A in the short term?
CGT has, for many years, been under the micro-scope of policymakers. Even the Conservative Party's 2019 manifesto stated that they would "review and reform Entrepreneur's Relief". Indeed, it was the current Prime Minister Rishi Sunak, as the then Chancellor, who scrapped this generous relief and replace with the Business Asset Disposal Relief, dramatically reducing the allowance on lifetime gains from ￡10m to ￡1m.
Despite the much trailed changes to CGT in the Press over the past few weeks nothing happened. Why? Well, a possible answer to that is it should be remembered the Autumn Statement is not a Budget. The Budget falls in March each year and it is the Budget that is the usual fiscal event where changes to tax rates are announced - not the Autumn Statement. It is very possible that when the Chancellor, whoever it is - Jeremy Hunt is the fourth this year(!) - stands up in spring that they announce changes to either the Business Asset Disposal Relief or the rate at which CGT is paid. If this is to be the case then this would leave owners with a lot less in their pocket after selling their businesses.
So, if you are considering capitalising on what is often a life times work by selling your business now is the time to act.
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