knowing that Retirement Relief would cancel out Capital
Gains Tax ("CGT") on the gain made on the sale of their business.Leonard Kasler & Company
Retirement and Capital Gains Tax
(20 Things to know about Enhanced Taper Relief )
Note: the law may have changed since this was written
1. Many owners of small businesses have inadequate pension funding, but intend to rely on the lump sum payment they get from the sale of their business.
2. Until the 1997 Budget such owners slept easy, knowing that Retirement Relief would cancel out Capital
Gains Tax ("CGT") on the gain made on the sale of their business.
3. Under Retirement Relief, the first £250,000 capital gain ("the Primary Retirement Relief") was free of CGT
4. The next £750,000 ("the Secondary Primary Relief") was only charged at half rate.
5. This is now being phased out, over four years, starting in the Tax Year 1999/2000.
6. The tax year is from 6th April one year to 5th April the next.
7. Primary Retirement Relief ("PRR") reduces as follows :-
TAX YEAR £ 1999/2000 200,0002000/01 150,000
2001/02 100,000
2002/03 50,000
2003/04 nil
8. Secondary Retirement Relief ("SRR") is phased out over the same period.
9. Indexation is also gone. This was the process by which gains due to inflation (as measured by the Retail Price Index) were ignored
10. This was hugely valuable to the taxpayer in past days of high inflation and its
loss will be mourned, 
if those days
return
11. Instead, you will have Enhanced Taper Relief ("ETR").
12. This was designed to get away from short-termism to stop people stagging share issues or making quick gains.
13. ETR reduces the gain made on a business sale by 7.5 per cent each tax year starting 1998/9.
Examples
14. You sell a business at a capital gain of £300,000 in 1998/9
£
Capital Gain 300,000
PRR -250,000
SRR (£50,000/2) - 25,000
25,000
ETR at 7.5% -1,875
Chargeable Gain 23,125
15. You sell a business at a capital gain of £300,000 in 1999/2000
£
Capital Gain 300,000
PRR -200,000
SRR (£100,000/2) -50,000
50,000
ETR (£50,000 x 15%) -7,500
Chargeable Gain 42,500
16. You sell a business at a capital gain of £300,000 in 2000/2001
£
Capital Gain 300,000
PRR -150,000
SRR (£150,000/2) - 75,000
75,000
ETR (£75,000 x 22.5%) -16,875
Chargeable Gain 58,125
17. And so on .............. the longer the sale is left, the worse the position.
18. The examples above ignore personal allowances which may be available to you (£6,500 for 1998/9)
19. It is ironic that, at the moment, this new regime actually encourages businessmen to sell earlier than later.
20. Speak to your accountant or call us…..............
Michael Breeze
Leoanrd Kasler & Company
Sunday, 13. October 2002
