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How equity release may provide a solution to the proposed Capital Gains Tax changes

Capital Gains Tax (CGT) is currently a hot topic among many business owners. The rumoured changes of aligning CGT with income tax have prompted an increase in the number of business owners and long-term shareholders considering a sale.

The spotlight on the sale of businesses has tempted business owners to use instruments such as Employee Ownership Trusts or Vendor Loan Notes to capture the value in their business without involving third parties. However, these come with the risk that unprepared or unenthusiastic employees become owners of a business where the profits are used to repay debts owed to the former owners, often for years post the initial deal. Equally, for the vendors, it does not provide cash on completion. Meanwhile, trade sales of companies to corporate buyers come with a different set of risks around deliverability and valuation, and length of process.

These risks can be mitigated with the right equity partner. At Foresight, we have completed more than 50 equity release investments over recent years, in each case helping owner managers transition ownership and management whilst providing growth capital and expertise to drive each company forward. Owner managers can cash out, but stay involved, retaining an interest in the growth of the company as it continues to develop with our support.

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