Entrepreneurs’ Relief: welcome but overdue relaxation of restrictions is late but still welcome!

Entrepreneurs’ Relief: welcome but overdue relaxation of restrictions is late but still welcome!

Wed 25 Nov 2015

In Finance Act 2015 measures were introduced to amend the definition of a “trading company” which restricted the availability of Capital Gains Tax Entrepreneurs’ Relief where the claimant did not hold a 5% stake in the trading company in its own right.

Those changes look set to be amended so that their impact may not be as far reaching as was originally the case.

Finance Act 2015 introduced anti avoidance measures to restrict the availability of Entrepreneurs’ Relief for contrived structures designed to benefit shareholders who did not hold the 5% interest in a company required for it to qualify them for ER as being their ‘personal company’.

This was introduced by amending the definition of a “trading company”. The effect of the changes was such that, in the case of a joint venture company, the activities of each company investing in the joint venture could only qualify for ER if the joint venture company investment was not regarded as a trading activity but as an investment. This excluded both ER-motivated artificial joint ventures and bona fide corporate trading partnerships.

The change also meant that activities carried on by a company, as a partner in a partnership or LLP, would be treated as non trading activities for Entrepreneurs’ Relief.

The restrictions introduced by Finance Act 2015 have affected genuine commercial transactions as well as the “contrived structures” the legislation was intended to prevent.

In the Autumn statement the Chancellor has indicated the government will consider bringing forward legislation to amend these changes in order to ensure relief is available in genuine commercial transactions.

This would suggest that changes will be made to the original legislation, and that the changes may be brought in before the next budget. However, no precise details of the amendments have been published, and neither has a date as to when any such amendments may take effect.

For more information, please contact:

Derek Carter



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