Another change anticipated in response to the Autumn 2018 Budget

Entrepreneurs’ Relief provides certain qualifying individuals with a reduced 10% rate of Capital Gains Tax on gains realised following a disposal of shares in a personal trading company.

One consequence of the Autumn 2018 Budget was that two new tests were added to the qualifying criteria for Entrepreneurs’ Relief. As of 29th October 2018, qualifying individuals were required to have been “beneficially entitled to at least:

  • 5% of the company’s distributable profits; and
  • 5% of its assets available for distribution to equity holders in a winding up.”

Entrepreneurs’ Relief: Finance Bill 2019While the government intended that this would only impact “1000 individuals”, the 5% beneficial entitlement to distributable profits condition caused concern across the accountancy profession that a number of existing company structures would no longer meet the qualifying criteria for Entrepreneurs’ Relief.

As a result of feedback from a number of professional bodies the Finance Bill 2019 has since been amended, proposing that if the new conditions are not met the individual must alternatively have a beneficial entitlement to at least 5% of sale proceeds in the event of a disposal of all the company’s ordinary share capital.

BHW understands that the amended Finance Bill 2019 has been considered in the House of Commons and had its first reading in the House of Lords on 9th January 2019.

Our corporate and commercial department will continue to monitor the progress of the Finance Bill 2019 in the House of Lords and will provide further commentary on the changes to Entrepreneurs’ Relief once the legislation is in final form.

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