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 |
