Business asset disposal relief (entrepreneurs’ relief) ― trusts

Produced by Tolley

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

  • Business asset disposal relief (entrepreneurs’ relief) ― trusts
  • Disposals of shares or securities
  • Disposals of business assets
  • Claiming business asset disposal relief
  • Planning for the sale of a company
  • Reorganisations

Business asset disposal relief (entrepreneurs’ relief) ― trusts

Entrepreneurs’ relief (now called ‘business asset disposal relief’) is a relief that reduces the rate of capital gains tax payable by business-owners on a disposal of their business. Trustees are able to claim the relief on the disposal of business assets held by them in the same manner that individuals can.

The relief was introduced on 6 April 2008 as ‘entrepreneurs’ relief’ and it retained that name until 6 April 2020. The structure of the relief has remained substantially the same throughout the period, although there have been changes to qualifying conditions and the lifetime limit, which are mentioned in this guidance note. The relief is now referred to throughout as ‘business asset disposal relief’.

Gains that qualify for business asset disposal relief are subject to capital gains tax at the rate of 10% whereas other trust gains are subject to tax at the higher capital gains rates of 20% or 28%. The preferential rate of tax means that the relief could bevery valuable to a trustee planning a disposal of any assets that potentially qualify as business disposals.

There is no provision that would permit personal representatives to qualify for business asset disposal relief.

As noted above, the conditions for claiming the relief are broadly very similar to those applicable to an individual, but there are some significant differences that a trustee specifically has to consider when planning a disposal. These are discussed in greater detail below. Business asset disposal relief as it applies to individuals is discussed in the Business asset disposal relief (previously known as entrepreneurs’ relief) guidance note in the Personal Tax module.

Disposals of shares or securities

The majority of trust disposals qualifying for business asset disposal relief are likely to bedisposals of shares or securities. ‘Securities’ for this purpose essentially means non-qualifying corporate bonds, since other types of securities are exempt from capital gains tax.

In order for the shares or securities to qualify

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