What is it? Since 6th April 2008 Entrepreneurs Relief should be claimed in respect of qualifying business asset disposals which otherwise would attract Capital Gains Tax at a rate of 18%/28% depending on effective personal tax rates. Of course 18 and 28% are far preferable to normal income tax rates but neither is as favorable as the Entrepreneurs Relief rate of just 10%. Entrepreneurs Relief should be considered when planning the winding up of solvent and insolvent companies.
Conditions Entrepreneurs Relief was introduced as a replacement for Business Asset Taper Relief.
To apply for Entrepreneurs Relief the following conditions must be met:
The company must be a purely trading entity.
Each qualifying shareholder must have held at least 5% of shares for at least 12 months.
The shareholders must have been officers or employees of the company.
Insolvent Companies When liquidation of an insolvent company is being considered it may be thought that Entrepreneurs Relief is in no way applicable or beneficial, this is because of the usually poor return to the shareholders.
However, there is something known as associated asset disposals whereby the shareholders wish to dispose of assets that have been used by the company but whose ownership remains with the individual shareholder.
Some Restrictions Where the associated asset was in business use for only part of the time that is was owned by the qualifying shareholder.
Where the individual shareholder was only involved in carrying on the business for part of the time that the asset was owned.
If the asset was a property asset and a rent was paid after 5th April 2008 for the use of that asset the relief will not be available.