In the Pre-Budget Report last
October Chancellor Alistair Darling announced
a series of changes to the capital gains tax
(CGT) regime for individuals and trustees.
These changes included the abolition of taper
relief and indexation relief and the introduction
of a single rate of CGT of 18%. The changes
take effect from 6 April 2008.
On 24 January 2008, in response to pressure from the business community, the
Chancellor announced a new ‘Entrepreneurs’ Relief’. The first £1m
of gains qualifying for relief will be charged at an effective rate of 10%.
Gains in excess of £1m will be charged
at 18%. An individual will be able to make
more than one claim for relief, up to a lifetime
total of £1m of gains.
The new relief is similar to Retirement Relief,
which was phased out with the introduction
of taper relief, but the new rules are designed
to be simpler:
- there will be no minimum age limit
- relief will be available where the relevant
conditions are met for a period of one year
ending with the disposal / cessation.
The relief may be available to gains arising
on the disposal of:
- the whole, or part, of a trading business
that is carried on by the individual, either
alone or in partnership
- assets used in a business which has ceased
- shares in a trading company, or holding
company of a trading group, provided that
broadly the individual owns at least 5% of
the voting rights in the company and is an
officer or employee of the company
- assets used in a partnership or by a company
but owned by an individual if the assets
disposed of are ‘associated’ with
a disposal of shares or an interest in partnership
assets. The individual must make the disposal
as part of their withdrawal from participation
in the partnership or the company
- certain disposals by trustees of business
assets and company shares where a ‘qualifying
beneficiary’ has a qualifying interest
in the business / shares.
A trading business includes professions but
only includes a property business if it is
a ‘furnished holiday lettings’ business.
A trading company will have the same meaning
as currently applies for taper relief.
HMRC have issued the draft legislation together
with draft explanatory notes and frequently
asked questions.
This is a complex area and if you have any
queries or concerns please do get in touch.
Internet link:
HMRC
guidance |
