CGT—investors’ relief
Produced in partnership with Satwaki Chanda
CGT—investors’ relief

The following Tax practice note produced in partnership with Satwaki Chanda provides comprehensive and up to date legal information covering:

  • CGT—investors’ relief
  • Basic conditions for individual investors
  • Qualifying shares, potentially qualifying shares and excluded shares
  • Conditions for trustee investors
  • The employee/office holder condition
  • Unremunerated directors
  • The employee exception
  • Employee/officer condition—possible traps
  • Example 1—connected persons
  • Example 2—connected company
  • More...

Investors’ relief is a capital gains tax (CGT) relief introduced by Finance Act 2016, designed for individuals who invest in unquoted trading companies, without being involved in the management or operation of the business. These investors cannot qualify for business asset disposal relief (BADR, formerly entrepreneurs’ relief, see Practice Note: CGT—business asset disposal relief (formerly entrepreneurs' relief)) on realising their investment, and would therefore, in the absence of investors’ relief, be taxed at the standard CGT rates.

Investors’ relief attracts the same 10% rate as BADR. It is, however, important to note that the two are totally distinct and mutually exclusive. BADR is for individuals who are actively involved in running the business: where the trade is carried out through a corporate vehicle, the individual must be an officer or employee of the company. By contrast, office holders and employees are specifically disqualified from claiming the 10% rate under the investors’ relief rules (subject to certain exceptions).

Investors’ relief, like BADR, is not available to corporate investors.

While the two reliefs are distinct, they both need to be taken into account when planning a business. For example, meeting the conditions for owner/managers to benefit from BADR can, in certain circumstances, have an adverse impact for those shareholders seeking to rely on investors’ relief (see Example 1—connected persons below).

There are other schemes which offer tax breaks for passive

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