Taxation of trusts—CGT entrepreneurs' relief
Taxation of trusts—CGT entrepreneurs' relief

The following Private Client guidance note provides comprehensive and up to date legal information covering:

  • Taxation of trusts—CGT entrepreneurs' relief
  • Type of trust which can claim entrepreneurs' relief
  • Basic conditions for entrepreneurs' relief for trusts
  • Relevant condition—disposals of shares or securities
  • Relevant condition—disposals of business assets
  • Claim for entrepreneurs' relief by trustees
  • Trustees planning for the sale of a company—practice points
  • Reorganisations

FORTHCOMING CHANGE: As originally announced at Autumn Budget 2017 and followed up by written statement after Spring Statement 2018, plus an announcement in Budget 2018, the government ran a consultation on the taxation of trusts from 7 November 2018 to 28 February 2019, inviting views on the principles of transparency, fairness and simplicity that it believes should underpin the taxation of trusts. In response, in July 2019, the Office of Tax Simplification issued its second report on inheritance tax. See also the report published by the All-Party Parliamentary Group for Inheritance & Intergenerational Fairness in January 2020 recommending the adoption of a new inheritance tax regime. See also the research exploring the use of trusts which was also published on 7 November 2018. See News Analysis: Exploring the consultation and review on the taxation of trusts.

Capital gains tax (CGT) rules have historically provided generous relief for business owners who dispose of their business. Previously relief was provided by way of taper relief. When taper relief was abolished in 2008, entrepreneurs' relief was introduced to preserve the lower effective rate of CGT on business assets enjoyed by business owners under the taper relief regime.

Broadly speaking, entrepreneurs' relief is a relief that reduces the rate of CGT payable by business owners on a disposal of their business. Trustees are able to claim