FAMILY business owners thinking of selling up and retiring need to take advice now to ensure they are not landed with an unnecessarily massive capital gains tax bill.

The warning comes from Salisbury solicitors Batt Broadbent who say if action is not taken before the end of the current tax year, some business owners could end up paying two to four times more tax when they sell their enterprise.

Currently, CGT is charged at 20 per cent for basic rate taxpayers and 40 per cent for higher rate taxpayers, so the new single rate of 18 per cent may look attractive.

But two allowances which reduce the tax bill on business sales are being abolished - indexation and taper relief.

Indexation has allowed business owners to take inflation into account up to 1998, and taper relief has reduced the bill depending on how long the business has been owned.

Following lobbying from the Federation of Small Businesses, the government has said it would give entrepreneurs a ten per cent rate on the first £1m of gain.

Andrew Johnson, Batt Broadbent's senior partner, said the old rules protected small business owners from incurring heavy tax bills when they sold up, particularly if the business had been in the same hands for many years.

The new rules seemed to be driven by the Government's concerns about taxation in big business, rather than small businesses, he said.

The activities of venture capitalists, for example, who buy up businesses and sell them on at a good profit, might be less attractive under the new rules, but, he said, there could be serious repercussions for small family businesses.

"Salisbury has a lot of family businesses," he said. "Many have been owned for more than 20 years and until now have been able to benefit from indexation as well as taper relief.

"The result of this new fixed figure is that family business owners, some of whom may want to sell up in the near future, could pay double the tax, or in some cases, three or four times.

"Even with a tax rate of ten per cent on the first £1m, there could be a substantial increase in their tax bill because they will not benefit from indexation."

He said there was a "window of opportunity" up until the end of March for small family businesses to take advice from their accountant or lawyer and "crystallise" the capital gain.

This could be done by transferring the ownership of the business now, thus crystallising the gain and setting up a new base for future CGT.

"For example, in an appropriate case, a business owned in the name of the husband could be sold to the wife," said Mr Johnson.

"With the sale of a business for £1m, there could be a saving of £90,000 in the tax bill. Not every business can benefit from this, but if there's a chance of a saving to be made, would it not be sensible to take some advice?

"Family businesses are vulnerable, but some may have that window to protect themselves against the worst."