Conditions for entrepreneurs’ relief

By Tolley
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The following Corporation Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Conditions for entrepreneurs’ relief
  • Disposals qualifying for entrepreneurs’ relief
  • Material disposals of business assets
  • Disposal associated with a relevant material disposal
  • Amount of entrepreneurs’ relief available
  • Claims and reporting
  • Practical points on entrepreneurs’ relief

Entrepreneurs’ relief is capital gains tax (CGT) relief that allows business-owners with chargeable gains on qualifying business assets to pay CGT at a rate of 10%. This relief is available on up to £10m of capital gains for each individual over their lifetime and is available on gains arising to sole traders, partners, shareholders and trusts. It applies to all disposals, so includes gifts and non-arm’s length sales. It is also possible to create a deemed disposal for entrepreneurs’ relief in certain circumstances.

Introduced by Finance Act 2008, entrepreneurs’ relief was available on disposals occurring on or after 6 April 2008. The legislation is contained at TCGA 1992, Part V, Chapters 3 and 4 and has undergone significant changes. This guidance note explains the rules as they stand from 6 April 2019 but will also explain how the rules have previously applied, as appropriate.

Disposals qualifying for entrepreneurs’ relief

For an individual to claim entrepreneurs’ relief, there must be a:

  • ‘material disposal of business assets’
  • ‘disposal of trust business assets’, or
  • ‘disposal associated with a relevant material disposal’

TCGA 1992, s 169H(2)

Whilst the three types of qualifying disposal for entrepreneurs’ relief all refer to disposals of business assets, the qualifying assets are different in each case. It is important from the beginning to categorise what type of disposal has been made and focus on the criteria for each.

Where the criteria for each disposal type are not met, entrepreneurs’ relief cannot be claimed. A disposal of business assets is, in itself, not sufficient.

Qualifying disposals by sole traders, partners and trusts, a qualifying gain may also be restricted to exclude gains attributable to non-business assets. Only the gain on relevant business assets is allowable.

A material disposal may also occur without a

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