29 October 2018
Patricia Mock, Tax Director, comments on Entrepreneurs’ relief:
“A tightening up on the rules relating to Entrepreneurs’ relief was announced in the Budget. These will apply from today to those who dispose of shares in a company where they have a shareholding of at least 5% and are employed or hold an office in the company. Entrepreneurs’ relief gives a capital gains tax charge of 10% on qualifying disposals rather than the usual 20%, and has been a costly relief, costing around £2.5bn a year.
“Until now these conditions have had to be met for at least one year prior to disposing of the shares in order to claim the relief. This holding period will be increased to two years for disposals from 6 April 2019.
“Additional tests have been added in calculating the 5% holding, to ensure that relief is only available for true economic holdings in the company. The tests will now need to be met in respect of entitlement to assets and profit shares as well as number of shares and voting rights, and will apply for disposals from today, Budget day.
“The measures are expected to raise about £85m a year once the changes have bedded in; £10m from the 5% definition changes and £75m from the increased holding period.”
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