Entrepreneurial Relief
The Chancellor has recently modified the proposals contained in the Pre Budget Report relating to the abolition of Business Taper Relief, by announcing the introduction of a new Entrepreneurial Relief. This will only be available in relation to business assets, on capital gains of up to £1 million. The relief will have the net effect of reducing your Capital Gains Tax rate from the new flat rate of 18% down to 10% in line with the old business taper rules.
CG TaxChecker will calculate the amount of relief available to you based on the chargeable gain, the proportion of business use, restricted as necessary by the £1million lifetime allowance.
Please note that you will not receive an actual CGT rate of 10%, instead your gain will be reduced by Entrepreneurial Relief at a rate of 4/9ths of your gain, e.g. if you have a business gain of £90,000, £40,000 of Entrepreneurial Relief may be available, reducing the gain chargeable to CGT at 18% to £50,000. This gives a Capital Gains tax liability of £9,000. This is an effective rate of 10% when compared to the whole gain of £90,000.
Conditions for relief:
- Assets will need to have been owned for one complete year to qualify for relief.
- Shareholders will need to hold at least 5% of the company shares in order to qualify for relief (e.g. most participants of employee share schemes will not be eligible)
- Entrepreneurial relief will be restricted to a lifetime limit of £1 million per qualifying individual.
- Commercial property owners who rent their premises to 3rd parties will no longer be eligible for relief.
Please note that legislation is yet to be published relating to Entrepreneurial Relief, therefore this information is based purely on the proposals, though we will update this section once the details of relief have been clarified.
