Possible Budget changes - Capital Gains Tax Entrepreneurs’ Relief
Friday, 26 October 2018
Given the current political situation and the furore caused by the removal of the Business Asset Taper Relief (BATR) in 2008, it may be a surprise if Capital Gains Tax Entrepreneurs’ Relief (ER) is abolished next week. However, don’t rule out some tinkering with the existing rules. So let’s consider the areas that may be reviewed:
- The 12-month ownership period. This seems generous, and could be extended perhaps to encourage more long-term investment.
- The level of personal shareholding. This is presently a relatively low 5% and currently means that even small minority shareholders can claim the relief.
- The percentage of a company’s activities which need to be trading for the shares to qualify for ER. HMRC’s view is that at least 80% of the activities need to be trading but this is not legislated for. Perhaps with legislation the Chancellor could increase the percentage to restrict the availability of ER further.
Even if changes to ER are introduced, it’s still a valuable relief. You should get advice as to the availability of the relief well in advance to make sure all requirements are met at the date of sale. Perhaps more so after next week’s Budget!
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