Entrepreneurs Relief gives you the opportunity to reduce your Capital Gains Tax on gains stemming from the sale of things like shares, assets, leaving partnerships and LLPs, and can cut the CGT by half. If you are interested in benefitting from Entrepreneurs Relief, you may well need to seek advice from legal experts who know the law inside out and can help you satisfy legislative requirements and help you with tax planning.
A growing number of entrepreneurs are finding it is harder to claim the relief due to challenges from HMRC. We have vast experience in helping entrepreneurs overcome challenges from HMRC, and our help could be the difference between obtaining the relief and missing out. We can help you obtain relief to reduce CGT payable on share transactions, for asset sales, for trading company share sales and get the relief under employee share plans approved by HMRC.
Those who meet the requirements for the relief and wish to sell shares can reduce the effective rate of tax payable to 10%. The relief is also available on lifetime gains up to £10 million. This means you could save up to £1 million.
The flat 18% capital gains tax rate was introduced during the 2008 Budget. After this, a new scheme was created to compensate entrepreneurs who would have paid 10% tax with maximum taper relief applied when selling their businesses prior to the changes. The lifetime limit was originally £1 million on the proceeds of business sales but was eventually raised to £10 million.
The relief can be claimed when all or part of a business is sold, when shares are sold or when business assets are disposed of once the entity is no longer trading. You may be able to claim the relief if you are in a partnership, an individual, a sole trader or have shares in your own limited company. Limited companies cannot claim the relief, though certain trustees are eligible. You will need to have owned your business for at least a year prior to disposing of it or for a year before it ceased trading.
You can claim the relief through your Self-Assessment Tax Return or by completing Section A of the ER fact sheet. Any gains over the £10 million lifetime allowance will be taxed at the usual 10% CGT rate or 18% if you are a higher-rate taxpayer. You have one year following the 31st January after the year the disposal was made. This means if you made your disposal during the tax year ending in 5th April 2016, you will need to make your claim by 31st January 2018.
Seek advice from the experts
The legislation around Entrepreneurs Relief can be very complex, which means it’s wise to seek advice from market-leading experts who can help you take the right steps and avoid missing out on the relief. There are many circumstances which may prevent you from obtaining it, so contact us today if you suspect you are eligible but require the support of professional Entrepreneurs Relief experts.