Entrepreneurs’ relief (ER) is a very valuable relief for individuals who sell shares in a trading company or dispose of the whole or part of a trading business. Where the qualifying conditions are met ER reduces the capital gains tax rate on a disposal to only 10% on lifetime gains of up to £10 million, giving a potential tax saving of up to £1 million.
The relief is only available to shareholders in trading businesses. Also, the shareholder must be an officer or employee and own at least 5% of the company’s ordinary share capital, including voting rights. All of the above conditions must be met throughout the 12 month period leading up the date of disposal.
An inevitable outcome of the increase in the level of entrepreneurs relief is the expansion of HMRC interest and level of enquiries into claims made. Over the next few weeks we will look at some of the common pitfalls which can trap the unwary.
For more information, please contact Lesley Sutton on 01484 550037 or email firstname.lastname@example.org.