Sell Now! (How The 2014 Budget May Impact On Business Owners' Exit Strategies)

The federal government's 2014 Budget contained a host of changes, including "proposals" to change the taxation of eligible capital property (i.e., goodwill, patents, trademarks, intellectual property, etc.) so that it will be taxed in the same way that gains on other depreciable capital property (e.g. equipment, commercial vehicles, etc.) are taxed. While changes to the eligible capital property ("ECP") regime seem logical and innocuous at first glance, if implemented these changes will lead to approximately a 10% increase in the corporate tax payable on such gains, or in other words a roughly 45% increase over the current corporate tax payable on such sales. These changes should cause owner-managers who may be considering selling their businesses, to start thinking about selling a lot more seriously.