Organising your business to achieve maximum advantage from the new Entrepreneurs' Relief that was introduced in 2008.
Understanding the new relief
- The Entrepreneurs' Relief was introduced when taper relief for capital gains tax was abolished. In essence, it brings in a rate of capital gains tax at 10% for the first million pounds of profits arising from the disposal of the business. Other gains are taxed at 18%
- The rules are complicated and care and attention need to be applied if the relief is to be available in an unrestricted form
At the set up
- When setting up a new business, it is important to consider the availability of Entrepreneurs' Relief at the outset. This should be encompassed within any advice regarding the general structuring of the new business
As the business grows
- As the enterprise grows in size and develops, it is possible that the nature of the trade and the type of assets held will change. If this change is material, it can affect the availability of Entrepreneurs' Relief on the sale. If the business seeks alternative funding, such as allowing a new investor to subscribe for new shares, this can also affect the availability of the relief
Sale of the business
- As soon as the sale of a business is being contemplated, the question of whether or not Entrepreneurs' Relief will be available should be examined in detail. The availability of the relief is dependent upon the nature of the trade and the type and quantity of assets held at the time of the sale. It is also affected by whether shares are being sold or whether specific assets are being disposed of. Entrepreneurs' Relief cannot be considered in isolation from other tax charges that might arise on the sale of a business, including the imposition of stamp duty - the sale of assets, particularly property, rather than the sale of shares, could mean that SDLT of 4% be imposed upon the purchaser which might make the price unattractive.
For more help and advice on entrepreneurs relief please contact Guy Rigby on 020 7131 8213 or email Guy Rigby