Budget 2018: the chancellor has announced two different changes to the definition of a personal company for Entrepreneurs Relief.
For disposals on or after 29 October 2018:
Two new tests will need to be met when claiming Entrepreneurs Relief (ER) on the disposal of shares. The claimant must now, throughout the relevant period, have at least:
- A 5% interest in the distributable profits of the company and
- A 5% interest the assets available for distribution to equity holders in a winding up.
These tests are in addition to the existing tests requiring 5% of share capital and voting rights and will also apply to the withholding of ER on goodwill; if either of the new conditions is met following a disposal of goodwill to a close company, relief will not be due.
For disposals on or after 6 April 2019:
The minimum period throughout which certain conditions must be met to be eligible for Entrepreneurs Relief is extended from one year to two years. There are special provisions for cases where the business ceased before 29 October 2018
Useful links:
External link
HMRC: Policy paper: Capital Gains Tax: Entrepreneurs Relief: definition of a personal company
HMRC: Entrepreneurs' Relief Minimum qualifying period extension
