ACCOUNTANTS and tax advisers are being deluged with phone calls and e-mails from small firms looking to sell their businesses before the effective capital-gains tax rate goes up in April.

The chancellor announced this week that he would be scrapping business-asset taper relief, which reduced the tax rate for people selling their business to 10%, and replacing it with a flat rate of 18%.

George Bull, head of tax at accountants Baker Tilly, said: Clients have been e-mailing me at midnight to ask what I think they should do.

“For businesses this announcement is an absolute nightmare because they must face the prospect that from April any extra gain they make from holding on to the business will effectively be swallowed up in tax.”

Mike Warburton, senior tax partner at accountancy firm Grant Thornton, warned that selling a business before April would not be easy. He said: “I am getting lots of calls from clients saying they are now thinking of selling their business before April. But selling a business can typically take several months to line up potential buyers. And of course if everybody else is doing it at the same time, it is going to affect the price. It is a distortion to the market.”

Charles Armstrong, founder and chief executive of Trampoline Systems, an IT software firm based in Shoreditch, east London, warned that the increase would drive entrepreneurs abroad.

He said: “The proposed change will discourage people from setting up new businesses in Britain. One of the primary motivations for entrepreneurs is the capital return at the point a company is bought by a larger business or floated on a stock market.”

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