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Goodwill boost will help IFAs to sell their businesses

IFAs claim Chancellor Gordon Brown&#39s cuts to business tax could accelerate consolidation in the advice sector by making it more lucrative for them to sell their businesses.
Reductions in capital gains tax and the abolition of stamp duty for goodwill on sales will make buying IFAs cheaper and selling them more lucrative.
The tax changes in Brown&#39s Budget could benefit both retiring IFAs offloading their businesses as well as those cashing in on the dash for distribution.
In his Budget speech to Parliament, Brown said he was giving Britain “a capital gains tax regime more favourable to enterprise than that of the United States”.
But leader of the opposition Iain Duncan Smith said the Budget was bad for small businesses as the 1 per cent increase in employers&#39 National Insurance contributions amounted to a 3 per cent increase in corporation tax.
From next April, individual IFAs selling stakes in their companies will qualify for accelerated tapering relief on capital gains, cut to 20 per cent for assets held for one year or more and 10 per cent for those held for more than two years.
IFAs selling stakes for loan stock rather than cash will also be able to defer CGT.
Corporations with IFA subsidiaries will pay no CGT at all if they offload their advice arms, a measure likely to accelerate consolidation.
Companies hungry to acquire distribution will no longer pay stamp duty on goodwill in IFA firms they buy, typically over 50 per cent of a firm&#39s value, and will also be able to write goodwill off against tax.
Roger Sanders Associates principal Roger Sanders says: “The abolition of stamp duty on goodwill and the accelerated taper relief on CGT are potentially good news for anyone looking to sell shares in a business. This could come at a good time when IFAs are looking at selling parts of their businesses in the depolarised world we are approaching.”


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