LONDON BRIEFING:BRITAIN'S small business owners have cashed in on their companies in an unprecedented flurry of deals ahead of new tax legislation that came into force at the start of this week, writes Fiona Walsh
Hundreds of privately-owned companies, from the London-based bicycle retailer, Evans, to the gluten-free bread maker, Yorkshire Farm Bakery, have sold up to escape the government's controversial increase in capital gains tax.
The change to the tax regime was introduced by chancellor Alistair Darling in a move aimed at clamping down on the huge tax breaks enjoyed by wealthy private equity bosses. But it also caught out small business owners - exactly the people in was supposed to help - and many have responded by bringing forward plans to sell their companies to beat the tax hike.
Previously just 10%, the new flat-rate CGT of 18% in CGT came into force at the start of the new tax year on Sunday. Deals done before the deadline will have saved millions of pounds in tax for small business owners.
There has been a steady trickle of deals since the changes were announced last year, culminating in a race to beat the deadline last week. A wide range of companies have cash in - last-minute deals announced on Monday included the sale of the up-market holidays company, Elegant Resorts, which at one time had planned to go public. It has been bought by tour giant Thomas Cook in a deal thought to be worth around £25 million.
It's not just small businesses that have beaten the Treasury - some of the country's leading company executives have reshuffled their shareholdings in recent weeks in moves to escape the impact of the CGT changes. Billionaire grocer Sir Ken Morrison alone is estimated to have saved up to £100 million by rearranging his £1 billion stake in the publicly-quoted Wm Morrison supermarket chain.
Sir Ken, former chairman and chief executive of the group that was founded by his father, has gifted millions of shares into family trusts, enabling the family to take advantage of the 10% tax rate before it was axed.
Scores of other high-profile executives have made similar moves - Stagecoach founders Brian Souter and sister Ann Gloag transferred shares worth over £80 million into family trusts. Rob Templeman, chief executive of department stores group Debenhams, also transferred a large chunk of shares to a family trust. Other leading figures to rearrange their shareholdings include vacuum cleaner entrepreneur Sir James Dyson, Stock Exchange boss Clara Furse and ITV chairman Michael Grade.
It's all made for a very busy - and lucrative - year end for the accountants. Not quite what the chancellor had in mind when he embarked on his ill thought out attempt to grab some favourable headlines last year by clobbering the private equity industry.
Goodbye to the 100% mortgage
The 100% mortgage is dead - and that's official. On Monday, first time buyers without savings were finally locked out of the British housing market as Abbey, the country's third-largest lender, joined the flood of mainline banks and building societies which have axed their no-deposit deals.
Would-be home-owners must now have a deposit of at least 5% but, in practice, buyers will need to have saved 15% to cover legal and other expenses, and as much as 25% if they are to stand a chance of getting the very best mortgage deals.
When house prices were soaring, first-time buyers struggled to get onto the housing ladder. Many were able to do so only by taking out 100% and 125% loan deals.
Now, even though house prices are falling at their fastest-rate for 16 years, according to figures from the Halifax yesterday, they have even less chance of owning their own home.
The global credit crunch that brought Northern Rock to the brink has now brought the "golden age" of easily available mortgage money to an abrupt end.
The withdrawal of funds from the market has been as rapid as the credit crunch, which has left lenders struggling to raise cash themselves.
Mortgage brokers say that there were more than 100 no-deposit deals on the market a year ago; now there are none, apart from a couple of banks in Northern Ireland and the 100% loans offered by Bank of Ireland and Bristol & West, which require parents to guarantee them. With most parents strapped for cash themselves, relatively few such deals have been taken out.
Those buyers who did manage to take out 100% mortgages before the shutters came down are, arguably, in an even worse position than those who failed to get on the ladder at all.
Many have taken fixed- rate deals that will need to be switched once they come to the end of their term.
But now those borrowers have no choice but to stay with their lender - whatever the rate.
With house prices now falling sharply, many of those "lucky" enough to have clambered onto the housing ladder face the terrifying prospect of plunging into negative equity.
More than 75,000 households could suffer that fate this year, according to the credit reference agency Experian.
For those borrowers, it will take more than a quarter point cut in interest rates from the Bank of England on Thursday to stave off the repossession men.
Fiona Walsh writes for the Guardian newspaper in London
