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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 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
Establishing that a trade exists can be highly advantageous when it comes to minimising your UK taxes on overseas property. This article looks at how you can still qualify for a 10% rate of CGT. keep reading
Tax Question: Can a uk resident who owns 50% of a company in Gibraltar,claim Entrepreneurs relief. The Gibraltar company owns a nursing home in the UK. Also what are the terms and conditions to be eligible to claim ER. keep reading
The Entrepreneurs Relief provisions provide anyone selling a trading business with a significant reduction in their capital gains tax liability. Many business owners will look to establish businesses using a company but is this always the best structure? This article looks at the advantages of using an LLP in terms of maximising Entrepreneurs Relief and reducing capital gains tax keep reading
Tax Question: Hi I have a Ltd Co contractor client who commenced their Ltd business on the 1st Sept 2013 and has now decided to cease trading in March 2014. There are £9,000 in post -tax reserves remaining in the company. One of the considerations is to apply for Entrepreneur's relief on the £9,000. However, i am aware this cannot be done until the 1st Nov 2014 (after 12 months). Question 1) Is it possible to classify the £9,000 reserves as a capital distribution (without going down the ER route) and claiming the annual CGT exemption thus avoiding any tax on the final amount? If so, is there any criteria to be aware of? 2) If we were to go down the ER route, would & can we wait until the 1st Nov 2014 before applying or would the fact the this company has not been trading between Mar 14 - Nov 14 affect its ability to successfully claim ER? Many Thanks keep reading
Tax Question: Entrepreneur Relief query Employee with 16% shareholding works fulltime in unquoted trading company - has held shares for more than 1yr. Sells holding as part of a VIMBO restructuring into a newco. The consideration received as a result of the VIMBO is £200k cash and 8% ord s/holding and pref shares in the newco. The employee continues to work in the newco. Will the oldco disposal proceeds of £200k be eligible for ER? keep reading
Tax Question: Fully furnished UK guest house B&B on disposal. Thank you very much for your answers. Sorry, I was not clear on my third question [copied below]. My meaning was that the ltd company would take the role of running and managing the guest house in 2/3 of the house. Would PLR, CG annual allowance and entrepreneurs relief still be eligible? 3. If the whole house was privately owned and a ltd company shares wholly owned and managed by same house owner 'traded' in 2/3 of the guest house, and: -the house and business were sold at the same time -no rent received by the property owners from the ltd co. -owned/traded period of more than one year. Would the above set-up still be eligible for annual allowance, PLR and entrepreneurs relief as an 'associated disposal ? keep reading
Tax Question: Dear Sir Following up on question dated 29/11/2013, on the shop and flat Capital Gains Tax, the following is the final situation. The trade through Ltd co was ceased in 2007, objective was to sell the shop. The business was operated through Ltd company owned 50% by me, and rent equivalent to mortgage payment was charged which was slightly less then the market rent. Property sold in July 2012, will I be able to claim entrepreneur investment relief? Looking forward to hearing from you. keep reading