Large IFA companies expect a "massive rush" of smaller advisory firms to sell up before the Capital Gains Tax (CGT) changes arrive in April.
As it currently stands, owners would expect to be taxed 10% when offloading their business but as of April 6, the tax will be raised to 18% across the board.
Helm Godfrey managing director Bruce Wilson says selling a business before the CGT is changed is a “no-brainer” for those thinking of cashing in.
“It will clearly flush out all those who may be deciding to sell and will accelerate the process,” he says. “I expect lots of activity in the next few months and we will be busy.”
Bradbury Hamilton managing director Sheriar Bradbury says the tax increase will make many firms revaluate their position.
“It does make a big difference – a firm worth £500,000 would currently pay just £50,000 tax, compared to adding another £40,000 after April – and many are worth much more than that,” he says.
“If anyone is thinking about doing it, it's only natural they will look to do so in between now and April.”
IFA Bradbury Hamilton has acquired 35 firms since its start-up and it says the average takeover time was about 6 months.
“From our point of view, there are a lot of processes we need to go through and it does take time,” Bradbury says. “As we have the experience of doing it, we can probably do it in about three months.”
As a result of the time taken to complete the deals, Bradbury advises firms to make a decision soon if they are keen to sell.
Helm Godfrey's Wilson agrees there are only a limited number of acquisitions anyone can make before April, but he suspects some powerful manoeuvring between now and then.
“The business community is in uproar, it will be interesting to see if it all goes through to be honest,” he says.
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