Entrepreneurs Relief - Important Changes

Entrepreneurs Relief has changed, are you aware of how it affects you?

Last year’s Budget announced a number of important changes to Entrepreneurs’ Relief. These changes took effect on 6th April 2019.

Entrepreneurs’ Relief is a relief from Capital Gains Tax available to individuals (and certain trustees but not companies) on a sale of business assets or shares. Where the relief is available, the first £10m is taxed at the special low rate of 10% as opposed to the normally applicable rates of 20% and 28%.

The changes to Entrepreneurs Relief include the following

Until now, Entrepreneurs’ Relief has been available on shares where the individual (who must be an officer or employee of the company) owned at least 5% of the Ordinary Shares of a company enabling him or her to exercise at least 5% of the voting rights in the company. From now on, the Relief will only be available if the individual is also entitled to 5% of the distributable profits of the company and to 5% of the assets available for the Shareholders if the company is wound up.

Until now, Entrepreneurs’ Relief has been available where the above conditions were satisfied for the period of one year ending with the sale. This period is now increased to two years. This change will not apply if the relevant company ceased carrying on business before 28th October 2018. The change will impact anyone who was planning a sale on or after 6th April 2019 in reliance on the one-year qualifying period. For Entrepreneurs Relief to be available on such a sale, it will have to be postponed until the two-year qualifying period is satisfied.

Until now, Entrepreneurs’ Relief has been available on shares where the individual (who must be an officer or employee of the company) owned at least 5% of the Ordinary Shares of a company enabling him or her to exercise at least 5% of the voting rights in the company. From now on, the Relief will only be available if the individual is also entitled to 5% of the distributable profits of the company and to 5% of the assets available for the Shareholders if the company is wound up.

Until now, Entrepreneurs’ Relief has been available where the above conditions were satisfied for the period of one year ending with the sale. This period is now increased to two years. This change will not apply if the relevant company ceased carrying on business before 28th October 2018. The change will impact anyone who was planning a sale on or after 6th April 2019 in reliance on the one-year qualifying period. For Entrepreneurs Relief to be available on such a sale, it will have to be postponed until the two-year qualifying period is satisfied.

Entrepreneurs’ Relief remains a valuable relief.