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August 16th 2013 / BY: Wisteria

What is Entrepreneur’s Relief?

If you are intending to sell or close part or all of your business, there are many different types of reliefs that you may be eligible to claim. These vary from Business Asset Roll-Over Relief, Incorporation Relief to Entrepreneurs’ Relief. Each of which will help reduce your overall capital gains tax liability.

One of the reliefs that business owners can claim for is Entrepreneurs’ Relief. This relief is given on the qualifying profits of a business disposal as long as you satisfy the criteria. There is actually no limit as to the number of times you can claim Entrepreneurs’ Relief, but during your lifetime, there is a maximum of up to £10 million for disposals made on or after April 6 2011.

Before you are eligible to claim entrepreneurs’ relief for the sale of a company, the conditions that you have to fulfil are:

  • Ownership of at least 5% of shares in the business
  • Have owned these shares for 12 months
  • Business must have been trading for at least 1 year
  • Be a director, partner or employee of the business.

If you meet all the above conditions, then it is likely you will be eligible to claim Entrepreneurs’ Relief on any qualifying gains up to the lifetime limit, which depends on the date of disposal. On the disposal of the whole, or part of the business made before 22 June 10, the gains made are reduced by the fraction 4/9 and the net amount is charged at the rate of 18% Capital Gains Tax. If the disposal of the business was made after 23 June 10, then the Capital Gains made would be charged at the rate of 10%.

To claim Entrepreneurs’ Relief in a given tax year, the amount you wish to claim relief on will go under the capital gains pages of your self-assessment tax return. However, there are deadlines as to when you have to claim the relief by; the time limit is the end of the 2nd January after the year in which the business was sold. If the business was sold in the 2012/13 tax year, then the deadline to claim the relief will be 31 January 2015.

If you would like more information about Entrepreneurs’ Relief and any other capital gains reliefs, then please contact Wisteria on 020 8952 0140 or email info@wisteria.co.uk where one of our tax specialists will be more than happy to help you.