Entrepreneurs’ relief on shares and securities

By Tolley
OMB_tax_img5

The following Owner-Managed Businesses guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Entrepreneurs’ relief on shares and securities
  • Disposals of shares or securities qualifying for entrepreneurs’ relief
  • Material disposal of shares and securities
  • When is a company an individual’s personal company?
  • Relevant enterprise management incentive (EMI) shares
  • Definition of a trading company
  • Dilution of shareholdings

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 entrepreneurs relief should be considered when succession planning involves gifting business ownership as well as in relatively straightforward sales of a business The general rules for entrepreneurs relief are detailed in the Conditions for entrepreneurs relief guidance note but this note focuses solely on the application to disposals linked to shares and securities Disposals of shares or securities qualifying for entrepreneurs relief An individual may claim entrepreneurs relief on gains arising from shares or securities in a company provided there is a material disposal of business assets or disposal associated with a relevant material disposal TCGA 1992 ss 169H 2 A disposal of trust business assets also qualifies for entrepreneurs relief but this is dealt with in the Entrepreneurs relief trusts guidance note If a disposal does not constitute either of the above then entrepreneurs relief is not available Given that an associated disposal is contingent on there being a material disposal it is therefore essential that the first step in ensuring availability of entrepreneurs relief is that there is a material disposal For a subsequent disposal to qualify as an associated disposal the material disposal must be a relevant material disposal On a practical level it is therefore important when planning disposals of shares and securities to consider the implications of a disposal on future disposals It is possible for a material disposal to prevent future material disposals whilst not allowing an associated disposal Material disposal of shares and securities A material disposal of business assets is defined in TCGA 1992 s 169I 1 as a disposal of business assets that

More on Selling the family business: