Date of publication: November 2018
For gains on or before 22 June 2010, Capital Gains Tax is charged at a flat rate of 18 per cent.
Current Capital Gains Tax rates are:
Entrepreneurs' Relief allows individuals and some trustees to claim relief on qualifying gains made on the disposal of any of the following:
The relief applies for the years 2008-09 onwards. There is a maximum lifetime limit of Entrepreneurs' Relief you can claim.
The relief effectively reduces the rate of tax to 10% for gains up to a lifetime maximum.
There's a maximum lifetime limit on the amount of Entrepreneurs' Relief you can claim on qualifying gains. The limit is:
An actual claim must be made for the relief within 22 months from the end of the tax year in which the disposal occurred.
A husband and wife may both claim so long as they both satisfy the eligibility criteria.
To be eligible for the relief an individual must be:
These conditions must be met for a period of one year prior to the date of the disposal, or to the cessation of trading if appropriate.
From 06 April 2019 shareholders who no longer hold a 5% interest due to a reduction caused by a share issue for the purposes of raising capital will still be entitled to Entrepreneurs’ Relief. This protection works as follows:
Special rules apply to shares acquired through EMI plans.
To be eligible you must have:
EMI share options remain eligible for Capital Gains Tax following a reorganisation provided either of the following hold:
Other types of reorganisation will not preserve eligibility but an election may be made to disapply the “no disposal” treatment and so trigger a chargeable gain.
EMI options and company reorganisations are complex matters and you should always seek professional advice before implementing them.
If you dispose of shares, in a share for share exchange, capital gains tax is normally deferred on the disposal of the original shares until the disposal of the replacement shares. If you exchange shares that qualify for entrepreneurs’ relief for shares that do not qualify then you will lose entitlement to the relief. You may therefore prefer to dis-apply the provisions relating to exchange of shares and pay the capital gains tax on the disposal of the original qualifying shares straight away in order to benefit from the relief.
Disclaimer: This note does not contain a full statement of the law and it does not constitute legal advice. Please contact us if you have any questions about the information set out above.
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