Entrepreneurs' relief

Entrepreneurs' relief
Entrepreneurs' relief is a Capital gains tax relief which enables certain individuals and trustees to benefit from a reduced rate of tax on the disposal of certain business assets (including shares in certain trading companies). The relief is not available for disposals by companies. The legislation is found in TCGA 1992 s169F onwards.

The relief in outline
On a disposal of qualifying assets the rate of capital gains tax is reduced from 28% or 18% down to 10%.

There is a lifetime limit of £10,000,000 of gains eligible for relief. This limit has been changed several times since the introduction of the relief. See here for previous limits. Broadly speaking to qualify for relief the business must have been carried on (or the shares owned) for 12 months in the three year period prior to the disposal.

Entrepreneurs's relief is not given automatically: it must be claimed. The time limit for making a claim is 31 January in the year following the tax year in which the disposal took place. For more details on the mechanics of making a claim see here.

How the relief is given
Entrepreneurs's relief is given in computing the tax payable on a chargeable gain. The gain is calculated in the normal way and the resulting gain (to the extent that it does not exceed the lifetime limit) is taxed at 10%. The capital gains tax annual exempt amount is available to be set against the gain. See here

Where the taxpayer has other gains in the year which do not qualify for entrepreneurs's relief the annual exemption is set against those gains in priority to the gains which qualify for entrepreneurs' relief. This is so that the taxpayer obtains relief first at the higher rate of tax which apply to those gains. See here

''Note that for gains made before 23 June 2010 the method of calculation of entrrepreneurs relief was significantly different. The gain was calculated in the normal way but then a reduction of 4/9 was applied to the gain. The gain thus reduced was then chargeable at the ordinary capital gains tax rate. See ' here''

Further information SUBSCRIPTION REQUIRED
More detailed information on Entrepreneurs relief can be found under the following topic headings

Disposals which qualify for Entrepreneurs' relief

Entrepreneurs' relief: ownership periods

Entrepreneurs' relief for sole traders

Entrepreneurs' relief for partnerships

Entrepreneurs' relief for trusts

Calculating the gain

Company reconstructions and sales

Interaction with other reliefs

SUBSCRIPTION REQUIRED
Practical planning points to ensure that Entrepreneurs' relief is maximumised can be found here

[