A great deal has been written about how changes to capital gains tax (CGT) in the last budget will prevent farmers from handing their farm down to their sons and daughter. However this change to tax laws will also prevent people from handing down other businesses to their families like estate agencies and this has hardly been covered in the press at all.
When I started my career in estate agency in 1980 a great many of my competitors had names like Smith and Son or sometimes Smith and Daughters. They were family firms which in some cases had been passed through many generations.
Over the last 32 years I have sold quite a few family firms. Many dated back to Victorian times. We have two family owned firms for sale at the moment , one has been trading since the 1930’s and the other since the 1960’s. Quite a few family owned firms still remain but I fear that their days are now numbered In their first budget, Labour passed legislation that will impose capital gains tax on families who pass on a business to their children. This will force the sale of these businesses and I think this is a terrible shame for many different reasons .
I find that family firms are often run in a very different way to their corporate competitors. They are more likely to make decisions with the long terms in mind, they value stability over short-term profits and they often care passionately about the wellbeing of their staff . It seems sad that they are to be destroyed for a relatively small and short-lived tax gain. It seems to me that this tax change is motivated by the politics of envy rather than by the need to raise revenue. There seems to be a view that everyone should have to start at the bottom and that giving your children a head start in life is somehow wrong.
This problem is not just confined to estate agency of course. There are 260,000 privately owned companies that employ ten or more people and collectively they employ over 14 million staff. This is about half the private sector workforce. At the moment about 85,000 family businesses are passed onto the next generation every year. A great many of these businesses will not be able to raise the money necessary to pay the tax bill and will have to be sold.
As a business transfer agent I might benefit from selling some of these businesses but as a UK citizen I think this decision is wrong for the country and wrong for the 14 million working people that Labour claims they want to support. I really do hope then that this policy is changed or that the tax advisors can find a way around it.
Adam Walker is a renowned business sales broker specialising in the letting agency sector
It has been a truly extraordinary week for M&A in the estate agency sector
