How to Claim Entrepreneurs Relief

 
 
 

What is Entrepreneurs Relief?

Entrepreneurs relief reduces the amount of Capital Gains Tax (CGT) on a disposal of qualifying business assets as long as you have met specific conditions throughout the one year qualifying period either up to the date of disposal or the date the business ceased trading.

Qualifying Capital Gains for each individual are subject to a lifetime limit as follows, for disposals on or after:

  • 6th April 2008 to 5th April 2010 - £1million

  • 6th April 2010 to 22nd June 2010 - £2million

  • 23rd June 2010 to 5th April 2011 - £5million

  • 6th April 2011 - £10million

Who is Entrepreneurs Relief Available too?

  • A sole trader or partner selling part or all of your business or its assets

  • Control at least 5% of the company’s net assets of which you are selling and are entitled to 5% of its distributable profits

  • Sell Assets from the above businesses within three years of closing down

How to Claim

Individuals - If you can do so, you should claim Business Asset Disposal Relief in your 2020 to 2021 tax return. If you cannot make your claim in your 2020 to 2021 tax return then a claim may be made to HMRC either in writing or by filling in Section A of the Claim for Business Asset Disposal Relief form.

Trustees of a settlement - A claim by the trustees of a settlement must be made jointly with the qualifying beneficiary for a trustees’ disposal. Joint claims may be made to HMRC in writing or by filling in the Claim for Business Asset Disposal Relief form. Section A should be completed by the qualifying beneficiary and the trustees should complete Section B.

Limitations of Entrepreneurs Relief

Selling to a larger company – If the company is much larger, your shares may comprise under 5 per cent of the total capital and voting rights. This would mean that you no longer meet the qualifying criteria for entrepreneurs’ relief when you come to cash in the shares.

Holding a small share in the company - If your share in your company is very close to the 5 per cent lower limit, you will want to ensure it does not fall before this threshold at a time when you want to sell up. Other share allocations may dilute your holding, so monitor your situation carefully and regularly.

Need Help Claiming?

If you are still confused whilst trying to claim Entrepreneurs Relief, do not hesitate to contact us. Our team of friendly chartered accountants are always at hand to help you with any of your tax and accountancy needs.

 
 
 
alistair bambridgeComment