Investors’ relief

By Tolley

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

Investors’ relief
Introduction
Conditions for relief
Disposals by trustees
Disposal of shares
Calculating and claiming relief
Share reorganisations
Receipt of value

Investors’ relief is a capital gains tax (CGT) relief on the disposal of qualifying shares in an unlisted company. A taxpayer making a disposal that qualifies for investors’ relief will pay tax at a rate of 10%.

Although it is a separate relief, the rules for investors’ relief were intended as an extension to entrepreneurs’ relief and therefore complement and mirror those rules, to a degree. See the Conditions for entrepreneurs’ relief guidance note.

For further commentary, see Simon’s Taxes C3.1320–C3.1329 (subscription sensitive).

Introduction

Investors’ relief is aimed at incentivising external investment. It is not intended to be accessible by individuals whose natural means of capital gains relief on a disposal would be entrepreneurs’ relief. Accordingly, most employees and directors will not be entitled to investors’ relief.

Also, unlike entrepreneurs’ relief, there is no requirement to hold a minimum number of shares in the company. There is a lifetime limit on the relief of £10m, which is in addition to that applying for entrepreneurs’ relief.

Conditions for relief

The rules for investors’ relief are contained in TCGA 1992, Part V, Chapter 5. This section was introduced by FA 2016, s 87 and Sch 14.

TCGA 1992, ss 169VA–169VY

Relief is available where a qualifying person makes a disposal of, or of an interest in, a holding of shares that includes qualifying shares in an unlisted company provided a claim for the relief is made.

TCGA 1992, s 169VC

A qualifying person is an individual or a trustee. Investors’ relief is not available to companies.

Qualifying shares

Qualifying shares are ordinary shares (within the meaning of ITA 2007, s 989) issued on or after 17 March 2016. They must have been held by the investor continuously for at least three years, or up to 5 April 2019