Tax & Accounting News

Making the most of Entrepreneur’s Relief

12/05/2010

Following the doubling of Entrepreneur’s Relief (ER) in this year’s budget, now may be a good time for individuals to ensure they are making the most of their allowance.

When a flat-rate Capital Gains Tax of 18 per cent was introduced in April 2008, entrepreneurs were given a reduced rate of 10 per cent on the first £1million of gains arising from the sale of all or part of a business they had owed. This limit has now been increased to £2million.

Generally, ER can be claimed by individuals or trustees who dispose of all or part of a trading business, or shares in that business, provided the following conditions are met:

• The shares are held in a trading company or the holding company of a trading group
• The individual selling the shares must own at least five per cent of the shares, and have at least five per cent of the votes in the running of the company
• The individual selling the shares must have been an officer or employee of the company during the past year of owning the shares

It may also be possible to claim ER on the disposal of a personally-owned asset used by the business, for example a property, although it may not be possible to claim if the business has been paying rent.

ER can also be claimed for certain securities such as Non-Qualifying Corporate Bond Notes. Where Capital Gains have been deferred, ER may be claimed when they come to be taxed, provided the ER conditions were met at the time of the disposal.

For more information please contact us.