There have been significant changes to the rules governing capital gains on exit of businesses and the disposal of shares. One of the most significant is taper relief. From the 5 April 2008, taper relief on disposal of business assets was abolished and replaced by the Entrepreneurs Relief.
These changes effectively result in taking advantage of an effective rate of 10 per cent for capital gains tax (CGT). However, in order to qualify for the 10 per cent relief there are certain conditions that have to be met under the strict rules set out by the HMRC.
From 6 April 2017, the Chancellor announced that the lifetime limit on capital gains qualifying for entrepreneurs’ relief will remain at £10 million.
The government previously levied CGT at 18% across the board. As a result under entrepreneurs’ relief, the first £10 million of gains has an effective rate of 10%. After this, 18% applies.
There’s no limit to the claims an entrepreneur can make for the tax relief. The total entrepreneurs’ relief over the course of a lifetime, however, must not exceed £10 million of gains. The current tax-free annual exemption remains in place. The former taper relief and indexation allowance have gone.
Considering whether to sell your business, then think about entrepreneurs’ relief…….and get some tax relief.
Entrepreneurs’ Relief applies to the disposal of shares in a business. Disposal of shares can take various forms and they could relate to:
- Disposal of shares in a company
- Transfer of shares to family members
- Company re-purchasing its shares
- Disposal of a shares in a subsidiary company
Entrepreneurs’ Relief is available for gains made following the sale of all or part of a business, and gains made from the sale of any assets when a business ceases to trade.
We can carry out a tax planning review specifically relating to entrepreneurs’relief allowing you to plan your exit strategy with a degree of confidence and thus allowing you to minimise to exposure to tax.
As with all tax planning advice, obtaining it at an early stage is most advisable to ensure that any decision you make concerning your business can be structured using the most tax efficient methods.
