February 2008

Entrepreneurs’ tax relief

Following widespread criticism of the government’s decision to abolish taper relief and increase the rate of capital gains tax to 18% from 6th April 2008, Alistair Darling has announced a new form of tax relief aimed at small business owners, called “Entrepreneurs’ Relief”.

This will offer entrepreneurs a lower capital gains tax rate of 10% on gains of up to £1 million made over a lifetime through disposals of all or part of a business after 6th April 2008. Members of employee share schemes are likely to be excluded from the relief, as an individual must own at least 5% of shares in the Company to qualify. Also the shares must have been held for at least twelve months and the individual must be an employee, director or other officer of the company at the time of the sale to qualify for the relief.

Unfortunately, the late announcement of the relief has left a remarkably short period of time for business owners to consider tax planning for the future with the changes set to be implemented within only 2 months of the statement from the Chancellor.

Please note that this information is provided for general knowledge only and therefore specific advice should be sought for individual cases.

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