To help achieve the ambitions of having a strong enterprise and investment culture, and ensuring that companies can access the capital they need to expand and create jobs the government has changed their approach to Entrepreneurs’ Relief.
The measure of extending Entrepreneurs’ Relief to external investors is intended to provide a financial incentive for individuals to invest in unlisted trading companies over the long-term.
Investors relief was introduced by the government in the Finance Bill 2016 to encourage external investment in entrepreneurial businesses. The new investors relief extends the 10% rate of capital gains tax to external investors, providing an incentive for individuals to invest in unlisted trading companies.
There are conditions that have to be met for investors to benefit from this change:
- the investor must have subscribed for newly issued shares on or after 17th March 2016
- the shares must be in an unlisted trading company or unlisted holding company of a trading group
- the investor cannot be an employee or officer of the company
- the shares must be held for a continuous period of 3 years from 6th April 2016.
The core qualifying conditions continue throughout the entire period of ownership and it’s worth noting that there is no minimum qualifying holding percentage required.
The relief applies a 10% rate of capital gains tax to gains accruing on the disposal of the qualifying shares. The relief has its own lifetime limit of £10 million gains, which do not count towards the limit for Entrepreneurs Relief. Good news for those investors who have used the Entrepreneurs Relief entitlement in full.
If you’d like to know more about how this approach could benefit your business do get in touch today for a free initial consultation with one of our experts.
