After the changes to the capital gains tax regime after April 2008 Entrepreneurs Relief is now the key tax reduction relief for many business owners.
It can provide for an effective CGT rate of 10% for disposals of businesses, shares and also property in certain circumstances.
There are a number of hoops to jump through in order to claim the relief. In particular you need to ensure that the assets sold are "qualifying assets". You also need to ensure you have owned them for the requisite period of time and that none of restrictions or anti avoidance rules apply. We look at all of this (and more) in our articles.
Entrepreneurs Relief can reduce the rate of CGT from 28% to 10% on the sale of shares. As the lifetime allowance is now £10 Million this can represent a massive tax saving. This online tool guides you through the rules to determine whether you will qualify for Entrepreneurs Relief. Available for Gold Members Only. keep reading
Articles on Entrepreneurs Relief include:
Tax Question: I am now a UK resident , non-domiciled . I invested ( in a non- listed company ) euro 100,000 , when I lived in the Netherlands 10 years ago and this year the company is buying this shareholding back for euro 200,-( two hundred ) , I also invested euro 150,000 in an other Dutch non-listed company , that we hope to sell for about euro 200,000 for my share . How can I offset this in my tax declaration , since I would like the proceeds to be remitted to the UK ? Thank you willy keep reading
Tax Question: I became a shareholder and Director in a business 9 months ago. It is a small business, my holding is more than 5%. A potential buyer has emerged, What are my options to optimise my personal tac position on any profit that might arise if the sale is closed before I have held the shares for 12 months? keep reading
Tax Question: I have been carrying out a trading business since 2000 and incorporated into a limited company in july 2008. I have owned the property since 2000 and was used by the business. when I incorporated the business i decided to keep the property out and rent the property to the business at full market rent. I am planning to sell the property before i sell the shares of the business.will i be able get entrepreneurs relief on the property. keep reading
In this Practitioner Zone article we look at the Entrepreneur relief changes in 2015 that may impact on property holding/developer structures keep reading
Tax Question: A shareholder in a trading company qualifies for ER except that- a)He is slightly short of 5%.Tis can be put right by transfer of necessary shares held by trustees of a discretionary trust in which he is a qualifying beneficiary.He will then hold 5% ad continue to hold for at least for a year before disposing them at a substantial gain. b)Disposal will be by way of company buy back. Q-1 Will the proposed solution in (a)be caught under anti avoidance 2 Will the disposal by way of company buyback be treated as a gain or distribution (dividends) Many thanks keep reading
Making the most of this generous tax relief can reduce your rate of CGT to just 10%. It can apply to non UK domiciliaries selling overseas businesses or shares in overseas trading companies. This article looks at how Entrepreneurs Relief applies to non domiciliaries whether they are taxed on the arising basis or the remittance basis. keep reading
Tax Question: C,a founding holder of ordinary shares in a UK trading company eligible for ER,is offered in exchange non voting Redeemable preference shares by the company.The MV of ordinary shares are significantly higher than the acquisition cost. Would this trigger CGT,if so can C utilise ER. keep reading
Tax Question: A company is incorporated as an SPV on 1/01/2014 as a trading company. The company is open to business but the company only was able to buys a property for development in May 2014. The developed property was completed on 31/12/2014 and the shareholders sold their shares on 5/01/2015 at a massive gain. All conditions for the entrepreneurs appears to be satisfied. However does the company satisfy the test of a trading company? Your reply will be highly appreciated. regards Diamond keep reading
The Chancellor announced 2 new restrictions on Entrepreneurs Relief in the 2015 Budget this week. In this article we look at these latest changes keep reading
Tax Question: I have been trading as a UK Limited company for 4 years but I am now considering retiring from the business in the next year or so. I have cash left in the company which would equate to around 6 months turnover. I have 3 questions: Would I be able to claim entrepreneurs relief on this closure? Am I better taking dividends from the company first before I close it down? I do have 3 grandchildren and wondered whether there was any advantage in gifting shares to them in advance of closure to allow them to receive dividends. keep reading
Tax Question: Business and property bought in joint names. Husband trade as a sole trader for a few years then ceased trading and wife ran the business as a sole trader for a few years. Wife ceased trading and husband ran the business as a sole trader for 3 months and sold the business. Can they claim entrepreneurs' relief ? or any Extra statutory concession keep reading
Tax Question: I'm a partner in an LLP that owns the IP rights to some software we developed. We have a buyer who wants purchase the IP and following the sale we plan to wind up the LLP. We're trying to establish whether we can claim Entrepreneur's Relief as the IP was developed over a year ago. keep reading
Tax Question: I have a client company looking to sell their company - 2 directors/shareholders. The proposed deal includes upfront cash and unascertainable future deferred consideration (formula based on future profits). Clients are obviously anxious to maximise Entrepreneurs Relief (ER). I know following changes in the 2nd FA 2010 it is no longer possible to claim ER on deferred consideration. So what is the best way to secure ER? keep reading
In this Practitioner Zone article we look at a recent case that decided removing an individual from a company's payroll before a sale of the company didn't end her employment for the purposes of claiming entrepreneur's relief. keep reading
Tax Question: A director of limited company is looking to perform a members voluntary liquidation where the company has settled all debtors and paid any outstanding tax, so a clean exit. The director is then looking to claim entrepreneurs relief and they do meet all qualifying criteria for the relief, so no issues there. The director of the company would like to continue working immediately after the company is liquidated and ideally start up a new company before the liquidation. The only assets they are looking to transfer is a handful of websites (listed as tangible assets in company financial reports) and domain names (listed as costs in company financial reports). This could be considered a phoenix company and the director would not do this if this was the case. So the question is, what is the best way the director can liquidate the company, claim ER, then continue working without breaking any tax avoidance rules? From research here are some ideas: 1. Claim ER then for 6 months the director can show a genuine break from the same activities to demonstrate that they attempted to change their career path. Then after 6 months the director decides to form a new company and go back to the same activities as their new venture did not suit them for whatever reason. 2. Claim ER then the director works in the same activities but as a sole trader rather than a director of a company. 3. Claim ER then form a new company immediately after or before, doing the same activities but with other shareholders to deem the company not identical to the first. Which of these would be most suitable to avoid any issues and are there any other options available? keep reading
Tax Question: Last year was profitable for 100% owned limited company so there is now a cash surplus of above 6 figures. From what I have read I could not keep this surplus in the company for the next few years whilst trying to build on the company further, then after a few years liquidate the company and withdraw the business cash at 10% cpital gains tax using Entrepreneurs Relief (ER). I believe HMRC would see the excess been held as not essential for the daily trading activities of the company, thus building up the surplus and withdrawing it using ER would be looked at tax avoidance instead of paying income tax? So my view is I either take out the surplus over the next few years using my personal allowance and using the basic rate tax dividends allowance of ?31,865, so effectively withdrawing around ?42,000 per year, or I have to do ER before April 2015 otherwise the surplus funds could be seen as excessive amounts to be held as they are not needing for regular day to say trading for the company. Am I right in thinking these are the only two options besides investing the surplus which would then turn the company status from a trading company to an investment company? keep reading