Entrepreneurs’ relief

By Tolley

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

  • Entrepreneurs’ relief
  • Introduction
  • Material disposal of business assets
  • Definition of a ‘trading company’
  • Associated disposals
  • Computational aspects
  • Claims and reporting
  • Tax planning

Entrepreneurs’ relief is a capital gains tax (CGT) relief available to taxpayers who make a qualifying business disposal (essentially selling or giving away their business).

TCGA 1992, s 169H(1)

Entrepreneur’s relief is a key relief in many business scenarios. To read about it in the context of some common types of transactions, see the following guidance notes:

  • Roll-over relief for traders ― restrictions
  • Business asset gift relief ― restrictions
  • Incorporation of a business
  • Tax implications of share sale (subscription sensitive)
  • Tax implications of trade and asset sale (subscription sensitive)
  • Takeovers
  • Loan notes and Qualifying Corporate Bonds (QCBs) and non-QCBs (subscription sensitive)
  • Tax treatment of earn-outs and deferred consideration (subscription sensitive)
  • Enterprise investment scheme re-investment relief
  • Informal winding up (subscription sensitive)

In most instances, entrepreneurs’ relief will be available to:

  • sole traders and partners selling / gifting the whole or part of their businesses (furnished holiday lettings are also included)
  • company directors and employees holding at least 5% of the ordinary shares and voting rights in a ‘qualifying company’ who sell / gift all or part of their shareholding

Qualifying gains arising from 23 June 2010 are taxed at a flat rate of 10%.

TCGA 1992, s 169N

The computational aspects are discussed below.

When calculating the capital gain or loss on the disposal of land or buildings used in the business, you should consider the HMRC ‘Capital gains tax for land and buildings’  toolkit. The aim of the toolkit is to help identify the key risks for the CGT reporting of disposals of land and buildings.

Also see the Checklist ― entrepreneurs’

More on Capital gains summary: