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The conditions for Entrepreneurs Relief depend on whether we are considering a disposal of:
A taxpayer may claim Entrepreneurs Relief on gains on the disposals of shares / securities in company where there is:
Trustees may also qualify in certain circumstances on the disposal of shares – this is discussed in a separate note.
For either of these, there must of course be a material disposal for Entrepreneurs Relief to be available.
In order to be a material disposal, one of four conditions must be met.
Condition one – general rule
Throughout a minimum holding period of two years:
Condition two – cessation of trade
This applies where the disposal occurs within three years of the company ceasing to trade (or ceasing to be a trading group members) and throughout the minimum holding period of two years:
Condition three – Enterprise Management Incentive (“EMI”)
This applies where there is a disposal is of EMI shares held by the individual from grant for at least two years and throughout that period:
Condition four – EMI shares and cessation
Finally, this applies where the disposal is of EMI shares and the disposal takes place within three years of the company ceasing to trade (or be a member of a trading group. In addition, the shares are held by the individual from grant for at least two years prior to the cessation and throughout that period:
It is worth pointing out here that, along with other changes, the test period was one year if the disposal took place prior to 6 April 2019.
This has been doubled to two years for disposals after that date.
Alternative conditions apply to disposals of other assets than shares / securities.
The following non-share disposals are considered in their own separate articles.
If you, or your clients, are considering disposing of any business assets then we would recommend obtaining tax advice in advance of such a transaction as relief might be secured with some pre-sale planning.
If you have any queries regarding Entrepreneurs Relief conditions, or the relief in general, then please do get in touch.
For our full and detailed sign post document on Entrepreneurs Relief then please visit here.
Entrepreneurs Relief conditions was last updated on 16 November 2019