Banking Entrepreneurs’ Relief

The outcome of the election could have a significant impact upon the tax rates payable on the sale of assets, including shares.

The issue

The outcome of the election could have a significant impact upon the tax rates payable on the sale of assets, including shares.  

Presently the sale of shares in trading companies or holding companies of trading groups can, subject to satisfying certain conditions, qualify for Entrepreneurs’ Relief whereby the capital gains tax rate on the sale is reduced to 10% (on lifetime gains up to £10m).

With a potential five-fold increase in the capital gains tax payable by those who currently qualify for Entrepreneurs’ Relief, the question arises as to whether there is anything that can be done now to mitigate any potential impact.

Locking in current tax rates and banking Entrepreneur’s Relief

Whilst a sale of the business prior to the election and any budget that may follow is unlikely to be commercially viable, there are other potential ways in which a gain can be triggered and the benefit of Entrepreneurs’ Relief claimed prior to any prospective changes.

One option, for example, could be to put in place a new holding company. Another could be to gift shares or transfer them into trust.

As well as the tax implications, as with any commercial decision, the options that are available need to be considered in the round but, if you are interested in exploring how you could potentially trigger a disposal now locking in the current tax rates and benefit of Entrepreneurs’ Relief please contact Haydn Rogan, Partner on  0161 214 0517 or email haydn.rogan@weightmans.com.

 

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