Conditions for entrepreneurs’ relief

By Tolley
  • (Updated for Budget 2020)

The following Owner-Managed Businesses 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

This document discusses the conditions for relief, meaning of material disposals of business assets, and definition of a trading company. It also covers the meaning of associated disposals and restrictions and lifetime limit for 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%. For disposals made on or after 11 March 2020, the relief is available on up to £1m of capital gains for each individual over their lifetime; prior to 11 March 2020, the lifetime limit was £10m. This reduction in the lifetime limit was announced at the Spring Budget 2020 and is detailed further below. Relief 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,

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