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: A farming partnership are to retire and sell all of their farmland and buildings.They are 95% arable with a small beef cattle herd.At the date of sale of the land all crops will have been harvested and prices will have been agreed for the majority of the crops though collection or delivery of the crops will take place post sale.Some of the cattle and the farm equipment will also only be sold post land sale.Is it reasonable to argue that the consequences of the land sale have such an immediate and direct impact that the business was effectively disposed of on the date that the land is sold and therefore qualifies for CGT Entrepreneurs Relief? As a second part to the question how does one determine the date a farming trade has ceased? In the above scenario would the date that harvesting has been completed and goods prepared for sale be the date of cessation of trade with the actual subsequent sale of stock and equipment effectively being the realisation of assets held at the date of cessation? I am looking at this as a fall-back for ER i.e assets sold after cessation of trade - if HMRC would not accept it as a disposal of the business. Thanks. keep reading
Tax Question: I want to sell my UK Ltd company to a foreign buyer. I am a UK resident. My company is involved with e-commerce activities; its main assets are some websites. If possible I would like to claim Entrepreneur's Relief on the sale but the buyer wants to run the business through an IBC in future so it looks like he would pay me to buy the Ltd company but then pay corporation tax on the sale of the Ltd company's assets to his IBC. Is this correct, or is there scope for selling the company to a foreign company and, at the same time as selling the shares, also transfer the assets to the foreign entity? Or is the best hope for minimising total tax paid by both parties simply to sell the assets (i.e. only the assets, not the shares) of my Ltd company to the foreign buyer's overseas company and pay 20% CT? keep reading
Tax Question: My accountant advises I may not qualify for Entrepreneurs tax relief if I choose to wind up my company at some point in the future because the company holds cash which is invested in a number of fixed term deposit accounts, and this may cause HMRC to argue that it is not a trading company. It is not tax effective for me to take dividends at present. Can you advise of any other tax effective strategies and also if it would be more helpful to put cash in notice or instant access accounts? keep reading
Tax Question: I understand there is new antiavoidance legislation affcting voluntary liquidation and capital distribution wherby the distribution is taxed as income. It appears to be aimed at Phoenix companies. Is it still possible to permanently liquidate a private limited company on retirement and pay the CGT rate with Entrepreneurs releif where appropriate? keep reading
Tax Question: A client of mine will receive a 3rd of the sale proceeds of his department which currently forms part of a partnership. He is an employee not a partner of the partnership. The deal is being structured so that his proceeds will be payment for a client list. The list of clients are those that he personally brought to the business and are recognised in his contract of employment as being ring-fenced and not subject to the normal restrictive covenants. The sale has been structured this way in order to create a capital payment to the employee. Is the payment for the client list a strong enough case to have the payment treated as capital? If so would ER apply? My concern as the list is in the employees contract it will be treated as income. The payment will be paid in three equal yearly instalments. Are there any other points to consider? keep reading
Tax Question: Thank you for your previous answer. For a Spanyard to be entitled to entrepreneurs relief in the UK, would they simply need to become resident in the UK (presuming they meet the other ER criteria)? keep reading
If you qualify for Entrepreneurs Relief you'll pay CGT at just 10% on gains up to £10 Million. Entrepreneurs' relief is not usually available when you sell investment properties but it may be available when you sell properties used in a trading business. In this Practitioner Zone article we look at how you can arrange for your investment property to qualify for Entrepreneurs Relief keep reading
Tax Question: A client of mine is selling the shares to his company under "purchase of own Shares by the company arrangements". At present he owns 67 and wife 33 out of 300 total shares. The agreement with fellow shareholders demands that wife should transfer 33 shares to Husband first and then Husband will sell 100 shares back to the company. Will it affect entrepreneur relief as Husband has not held these shares for more than 12 months. Husband and wife are both employee of the company as well. Further : Husband is confident that he will get the relief on his own shareholding but the query is "can Husband get the relief on the share he acquires from wife just before disposing off. Thanks keep reading
Tax Question: Hi One of the key criteria for claiming Entreprenuers Relief is that a company must be a trading company in the 12 months leading up to the disposal of shares. I have a situation where a PSC Contractor Ltd Co has been open and live for 12 months PLUS. However, the fee earner only had a 6 month contract and earned fees into the Ltd Co for this amount of time. The other 6 months was spent in permanent work (however the Ltd Co was kept open and technically active so a few transactions did go through during these 6 months) Would this potentially fail the definition of "trading" in order to make a claim for ER (the claim would be less than £25k)? Thank you keep reading
Tax Question: Hi I have a situation where a Contractor Ltd Co (PSC) has approximately ?25,000 of post tax distributable cash reserves. The cash has been generated as a result of trading activities only and no non-trading activity has taken place. They want to dissolve the company and meet the following criteria for Entreprenuer's Relief: 1) Ownership and trading for more than 1 year 2) 100% shares in the Co 3) Are a director of the company Question What is the current tax situation for PSC contractor ltd co's with reserves of ?25k or below in claiming Entreprenuers Relief? If they meet the key qualifying conditions, is there any reason as to why HMRC could deny or refuse them ER on the reserves at 10%? Thankyou keep reading
Tax Question: 1.What tax options are there if company not trading, so cant qualify for ER? because the company has substantial non trading activities? 2.What taxes are due under these circumstances? 3. After capital costs have been deducted, what taxes are liable, corporation at 20%. CGT at 18% for first 30k. 28% for remainder of gain. 4.Are there any personal taxes to pay? 5. National Insurance tax to pay? 6. The new dividend rate starts at 7.5% what are the rates before the 32.5% and 38.5% come in to play. keep reading
Tax Question: A trading company which is vat registered has Fiixtures £30k and lease £30k and tax written down value. These are now being sold for £60k each and organic goodwill also sold for £40k. Total profit is £100k. The rent payable to landlord is subject vat. Q1. Is vat chargeable on the sale of lease? Q2. Some time ago The shareholders bought another business which was put in a separate trading company . lease cost £50k and lease £50k so is there any rollover relief? Q3. Is there any way entrepreneurs relief can be claimed on the sale ? keep reading
Tax Question: Re: Entrepreneur relief for non doms: Can you provide advice for a non-Dom (overseas domicile of origin) who has been resident in the UK for more than 15 years and declaring remittance basis for all of the prior years. The person has been a shareholder (less than 50%) in a Foreign Swiss based trading Company for 13 years , but only became Director/President of the Company in March 2015. 1) Anticipating a sale during 2016 (ideally after 5th April 2016) with a sizeable Capital gain (many millions but below ?10M), would entrepreneurs relief of 10% CT be available if the sale took place following the one year anniversary of being a director? 2) Would the Capital gain generated over the 13 years be fully applicable even if the Director/President position has been held for 1 years? Would it be safer for the capital gain portion of the sale be remitted by the buyer the buyer direct to the seller in the UK on closing of the transaction rather than via an overseas bank account? keep reading
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