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UK Tax & Wealth Management

Information and background on Inheritance Tax, Investments, SIPPS, Non Doms & Tax.


Entrepreneurs Relief

Are you an entrepreneur who is planning to sell the business or company you have grown from its infancy? Are you currently a business partner in the company you are planning to sell or a sole trader? Are you worried about the amount of Capital Gains Tax that you are potentially liable to pay? If you answer yes to these three questions then it may be time to seek financial advice. You may be able to pay less Capital Gains Tax through the Entrepreneurs Relief scheme, set up by the current government.

The scheme is open to directors who sell all or part of their business, providing they have at least a 5% stake. It entitles you, as a director, to pay just 10% Capital Gains Tax on any assets that qualify under the scheme, rather than the usual 28%. Whilst there are a number of criteria to meet, the scheme could save you a small fortune providing you apply in a timely and proper manner. There is no limit on how many times you can apply, and the scheme allows you to apply for up to £10 million worth of relief over your lifetime.

However, in the past 12 months the chancellor has moved to close a loophole in the law in order to ensure the relief is "only available to those selling genuine stakes in businesses". In effect, this prohibits managers collaborating with others to form a joint venture that qualified for the relief under the scheme. Whilst this makes the rules slightly more stringent, all genuine directors can still benefit.

To qualify for the scheme you must have owned at least a 5% stake in the company and have possessed voting rights for at a full year. The company's main function must be trading (as opposed to investment or other non-trading activities) and you must be an employee or director of said company.

Entrepreneurs Relief

Hopefully, these will provide some useful background on the issue, and equip you to make informed decisions and choices in this most financially sensitive of areas.

If you would like further assistance or more information on this subject please contact us through this email link

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