Is this the end of Entrepreneurs’ Relief?

Entrepreneurs’ Relief has been under a great deal of scrutiny as of late. In the run up to the General Election, both of the main political parties acknowledged there was a need for reform (with Labour arguing it needed to scrapped in its entirety).

Now the Conservatives are in government, it is likely the relief will be 'reviewed' in the next Budget. However, there’s still no certainty over the future of the regime, as it currently stands.

What is Entrepreneurs’ Relief?

Since 2008, business owners and owner-managers have been able to claim Entrepreneurs’ Relief (ER), if they are selling their business assets, or the company itself.

By reducing Capital Gains Tax to a rate of 10% (instead of 20%), ER encourages entrepreneurs to grow their businesses, by offering them an incentive to reinvest funds into other start-ups. The regime allows you to claim as many times as you want and/or need, within your lifetime, up to the generous limit of £10m.

Am I eligible?

ER can be claimed through your Self Assessment Tax Return, or by filling in the Entrepreneurs’ Relief help sheet, if your company qualifies. If you are selling part of/all of your business, you need to be a business partner or sole trader, who has owned the company for at least 2 years, in order to qualify for relief. If you’re selling shares in a company, rules differ slightly. The company’s activities must depend upon trade, and you must be an employee/office holder of the business in question.

What to expect going forward

For those who are considering claiming for ER, it’s worth bearing in mind that change is expected to brought about this year. Whilst the Conservative party emphasised the importance of entrepreneurship across Britain, their party manifesto directly addressed ER, stating that it hadn’t ‘fully delivered’ on its objectives. Therefore, the party ‘will review and reform Entrepreneur’s Relief’.

It is expected that these changes will be announced in the 2020 Budget, on March 11^th. Some recent changes have already been implemented. As of April 2019, the required holding period for shares was increased from one year to two. This is a hint that any reform to come will be stringent, rather than being an extension of the regime.

How can we help?

The situation won’t become entirely clear until the Budget is announced, but if changes are made, they could be introduced as early as April this year. Until then, if you’re a business owner contemplating selling, we can ensure that you meet the criteria for ER and make the most of the regime, before any forthcoming changes are implemented. Get in touch today and see how we can help.