Concession greeted as spur to growth
POST BUDGET: FAMILY BUSINESSES
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The Chancellor's decision to exempt minority shareholdings in family businesses from inheritance tax was yesterdayhailed as a significant contribution towards the Government's declared aim of promoting enterprise.
Peter Leach, chairman of the centre for family business at accountants BDO Stoy Hayward, said it meant that there were no longer any "blockages to passing on wealth".
He predicted that the measure, which could affect thousands of people when it comes into force from 6 April 1996, would work in two main ways. First, it would encourage "inter-generational" share transfers, which have traditionally not been as popular in Britain as in the United States, Germany and elsewhere, and so stimulate the creation of long-lasting companies. Second, because shareholders would no longer be inclined to downplay the value of the stakes for fear of creating a tax liability, it would encourage more active trading of them.
Ian Peters, head of small business services at National Westminster Bank, also welcomed the measure, pointing out that research carried out by the bank in the summer found that one-third of owner-managers intended to sell their businesses, with the inheritance tax position a prime consideration.
The parallel measure of reducing the qualifying age for capital gains tax retirement relief from 55 to 50 is also being seen as an important move.
Not only does it take account of the trend for people to cease working earlier than in previous generations, it also provides an environment in which an entrepreneur can build up a business over 10 years and then use the proceeds of selling it to set up another, so promoting enterprise while rewarding it. This might stimulate the growing market for "business angels", or private individuals who typically invest tens of thousands of pounds in private companies.
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