Over time, Capital Gains Tax has become a significant issue for rural landowners. Entrepreneurs’ Relief was introduced in 2008, and mitigates Capital Gains Tax upon certain disposals of business assets by an individual. When applied, the qualifying gains are taxed at ten per cent which is available on up to £10 million of gains for each individual claimant in his/her lifetime.
How can I claim relief?
Accessing Entrepreneurs’ Relief requires a qualifying business disposal. The relief may only apply on either; ‘the whole of part of a business disposal’, or ‘the disposal of business assets in the three years following the cessation of a trading business’. Additionally, the business must have been owned for twelve months prior to disposal or cessation.
Who is eligible?
Entrepreneurs’ Relief is available to sole traders, partners in a business, and shareholders in specific businesses and trustees.
Sole Traders are eligible for Entrepreneurs’ Relief upon disposal of part or the whole of a business; and post-cessation disposal of business assets. However, the disposal must include a minimum of one business asset, and the business must have been in ownership of the sole trader for a minimum of twelve months prior to the disposal or cessation.
Retirement from a partnership qualifies as the disposal of or cessation of a business. Entrepreneurs’ Relief will be available where the disposal of an interest in a partnership is linked to a disposal of an asset such as land.
A shareholder must have at least five per cent of the shares and the voting rights to claim Entrepreneurs’ Relief, or they must be an officer or employee of the company for a minimum of twelve months prior to the disposal. Furthermore, the company must be a trading company.
Trustees do not have an entitlement to Entrepreneur’s Relief in respect of trust gains. The trusts are only entitled to the relief if the beneficiaries are entitled in their own right. Beneficiaries must be involved in the business and cease to be within the business; the retirement from the business will qualify as a cessation even in the event that the partnership continues trade. Any sales of assets within three years of the cessation will qualify for Entrepreneurs’ Relief.
To fully assess your entitlement to this relief based on your own specific circumstances, you should seek further advice from your accountant. For assistance with valuation of your business assets please contact our regional valuers: