Technical change to Entrepreneurs’ Relief
Entrepreneurs’ Relief applies to the sale of a business, shares in a trading company or an individual’s interest in a trading partnership. Where Entrepreneurs’ Relief is available CGT of 10% is payable in place of the standard rate. There are a number of qualifying conditions that must be met in order to qualify for the relief. One of these conditions is that an individual’s shareholding must make up at least 5% of the shares.This means that entitlement to Entrepreneurs’ Relief is lost where there is a dilution below the 5% qualifying level as a result of a new share issue. In some cases, this rule can act as a disincentive for entrepreneurs to accept external investment.The government has therefore decided to make changes to the legislation as part of the Finance Bill 2018-19 to protect entrepreneurs whose shareholding is ‘diluted’ below the 5% threshold. This measure, which was first announced at Budget 2017 will have effect for shares held at the time of fundraising events to raise additional equity funds which take place on or after 6 April 2019.There is a lifetime Entrepreneurs’ Relief limit of £10 million.