This trend risks further exacerbating the existing skills crisis in the NHS, which has a shortage of qualified staff.
Accountants and business advisers, Moore, says that scrapping Entrepreneurs’ Relief will sharply increase the cost for many doctors and other professionals of extracting all the cash that they have saved within their company, at the point at which the company is then closed down, due to them having to stop work.
To avoid the possible capital gains tax hike, many doctors are deciding it is better to stop now and are rushing through the closure of their business before the Budget announcement on Wednesday afternoon, as opposed to waiting to hear what the actual plans are.
Entrepreneurs’ Relief has been used in certain instances when an owner wishes to close their business and take out the remaining money/assets from their Personal Service Company, as this relief means that the capital gains tax rate is at just 10 per cent (rather than the ordinary 20 per cent).
As many of these doctors and other professionals, may have chosen to use their company as a savings pot, which means for some having saved hundreds of thousands of pounds in their business and therefore the possible scrapping of entrepreneurs relief will mean a substantial tax hit which would impact on the amount of cash available.
There are tax rules in place to prevent company owners from closing a company and then restarting the same work as either another company or sole trader or partnership.
Moore explains that many senior doctors and other professionals will have built up large amounts of money in their companies over the last decade or more – intending to use it to fund their retirement, either as a savings pot for themselves or their spouse or family, which has been seen as prudent tax planning.
Lucienne Parry, Partner at Moore, said: “Fears Entrepreneurs’ Relief will be scrapped is causing panic and concern with these highly skilled ‘workers’ feeling that they need to act now as the amount they may earn if they carry on trading may not be as much as the possible tax bill if this relief is removed and not replaced with anything similar.
“Every time a Government threatens a big tax grab it tends to have damaging and unintended consequences on taxpayers.
“The result is that GPs, surgeons and consultants are being lost to the NHS. As these individuals will no longer be providing their sought after knowledge and services.
“Doctors are also not the only ones using Personal Service Companies; other highly skilled workers such as IT contractors and consultants in the financial and professional services industry also use them.”
If you wish to comment on this article, please log in and use the Reply button below. Registering is free and easy - see 'Join Shout99'.
Susie Hughes © Shout99 2020