When you sell or transfer all or part of your business you might be entitled to claim Entrepreneurs’ Relief in respect of any capital gain you make. This means that the maximum rate of tax that will apply will be 10%. However, to qualify there are conditions that you and your business must meet.
When is relief available?
Entrepreneurs’ relief (ER) is available for qualifying business disposals. The relief imposes a lower rate of capital gains tax (10%) than the top standard rate of 18%, and is subject to a lifetime limit of £10 million of gains. The relief applies to disposals of a business, but can also apply to disposals of assets which are associated with your withdrawal from a business. For example, if you own a warehouse that your partnership uses and you leave the partnership, ER might apply if you sold the warehouse to the other partners.
What are the conditions?
ER is only available where there is a qualifying disposal of business assets, which includes selling all (or a part, if that part can operate as a business in its own right) of them, or selling shares in your personal company. While it sounds simple, a number of traps in the legislation can mean ER won’t apply. Use our checklist ahead of a disposal. It won’t guarantee you ER, but it can help you avoid missing out for want of taking a few simple steps.
How to use the checklist
The checklist contains a number of questions designed to be answered “Yes”, “No” or “Not applicable”. If you are considering selling your business or shares, run through the list. If you answer “No” to any of the questions, ER won’t apply and you should try to rectify the issue before the sale.
Download the Checklist >>> entrepreneurs-relief-checklist.doc (28 downloads)
For more information, we provide a Business Consultation to ensure our clients benefits from tax planning and accounting matters.