Entrepreneurs’ Relief reduces the amount of capital gains tax that individuals pay on disposals of your business or certain business assets from 20% to 10%.
If you’re selling your business you must be a sole trader or in a partnership. You must also have owned the business for at least 2 years before the date of sale.
If you’re selling shares in your trading company you must have been an employee or officer for 2 years.
You must also have at least 5% of the shares and voting rights of the company.
What are the changes in The Finance Bill 2018/2019?
- Before 5 April 2019, the holding period for shares was 12 months rather than 24 months. This makes being entitled to Entrepreneurs’ Relief more difficult.
- As well as an individual holding at least 5% of the ordinary shares with voting rights, they must also be entitled to either 5% of profits (dividends). Or 5% of the sale proceeds had the whole of the ordinary share capital been sold on the day of disposal.
There new rules which allow certain shareholders to retain their claim to entrepreneurs’ relief in certain circumstances. For example, where their shareholding falls below the required 5% because of dilution from equity investment.
How do I claim Entrepreneurs’ Relief?
Entrepreneurs’ Relief is claimed when you declare the gain on your self-assessment tax return.
If you’re unsure about if you’re entitled to or how to claim Entrepreneurs’ Relief, get in touch today to find out how we can help.