Hospitality operators planning to sell their businesses should do so before April to avoid getting clobbered by an increase in capital gains tax, experts advised this week.
In last week's pre-Budget report, Chancellor Alastair Darling announced a flat capital gains tax rate of 18% to replace the existing tapered system.
Under the current regime, if an operator has owned a business for more than two years they would qualify for business asset taper relief and pay 10% capital gains tax when selling up.
Next April's increase means business owners need to act quickly, according to Mark Sheehan, managing director of property agent Coffer Corporate Leisure. "The capital gains increase from 10% to 18% gives anybody looking to sell their business a window of opportunity before April to benefit from almost half the amount of tax they'll have to pay later," he said.
Sheehan said hospitality firms that acted quickly would capitalise on a market which remained strong, but which would be likely to be hit by the effects of the credit crunch.
"We've seen high values in the leisure and hospitality sector but banks are beginning to be more cautious in the terms they offer buyers. We could see values drop to lower than they are now," he said. "If your business is in good health there's plenty of time to sell before April and you are selling in a very strong market."
Sheehan added that the introduction of the 18% capital gains tax would be unlikely to deter people from investing in the hospitality sector.
By Daniel Thomas