Close-Up: Live Issue - Will taper relief's demise affect agency sell-offs?

Adland has been surprisingly quiet over the Chancellor's announcement that taper relief is to be abandoned.

The silence with which adland greeted what is being seen as a stifling of entrepreneurship by Gordon Brown's government has been thunderous.

An odd reaction, perhaps, for an industry that prides itself on a culture of innovation, and with more than its fair share of self-made millionaires who have sold businesses they built from scratch.

Odder still, given that taper relief, the tax legislation that allowed company founders selling out to pay tax as low as 10 per cent on their profits, might have been made for the ad business.

However, the announcement by the Chancellor, Alistair Darling, that he was abandoning taper relief in favour of a simplified regime, which taxes gains at a flat rate of 18 per cent, seems to have generated little indignation across adland.

Yet even if he can be persuaded his decision was made with more haste than thought ("he's taken a sledgehammer to crack a nut," Peter Walker, the finance director at CHI & Partners, says), there's no prospect of a backtrack before taper relief ends in April next year.

This should serve to concentrate the minds of any agency bosses in advanced sale negotiations. "It will be an encouragement for them to get a move on," a former network boss with long experience of buying agencies says. Whether or not the death of taper relief calls a halt to agency sales or drives up selling prices is less certain.

Bob Willott, the editor of Marketing Services Financial Intelligence, believes the change might persuade some would-be sellers to sit tight, but he doesn't expect any significant rises in what buyers pay.

"I can't imagine any buyer offering to pay more for an agency than they think they should," he says.

The effect on earn-outs is also hard to predict. "There are risks attached to earn-outs not due for payment before next April," Willott explains. "A lot depends on what Darling decides to do."

Those issues aside, few expect the end of taper relief to cause more than a few ripples. "Nobody took much notice of it when it was introduced, and nobody is taking much notice about its impending death," an ex-agency boss contends.

Why? Mainly because of the way many agency start-ups begin life. "They might be born out of a conversation in a wine bar," an industry onlooker says. "Few set out with a business plan which takes the tax implications into account."

Willott even suggests that ending taper relief could restore some integrity to adland by helping to eliminate the short-termist "get-rich-quick" mentality.

Walker agrees. "We need to get back to a people-based business. That means partnerships in which people share the profits," he says.

You have

[DAYS_LEFT] Days left

of your free trial

Subscribe now


Our new premium service offering bespoke monitoring reports for your company.

Find out more

Become a member of Campaign

Get the latest news and insight from Campaign with unrestricted access to, plus get exclusive discounts to Campaign events

Become a member

Looking for a new job?

Get the latest creative jobs in advertising, media, marketing and digital delivered directly to your inbox each day.

Create an Alert Now