MVL - Entrepreneurs Relief
You may be able to pay less Capital Gains Tax when you sell all or part of your business. Entrepreneurs Relief means you will pay tax at 10% on qualifying assets, instead of the normal rate of 18% or 28%
Entrepreneurs’ tax relief is currently available on up to £10 million lifetime gains, so your tax saving could be up to £1,800,000.
Entrepreneurs’ tax relief is available on the disposal of all or part of a business that an individual has owned for at least one year prior to the date of disposal. The disposal must be of assets comprising the business, and not just of assets used in the business. To claim relief, you have to satisfy a number of conditions through the qualifying period, which depend on the type of business disposal you've made.
The government will continue to back entrepreneurs - but wants to ensure relief is focused on supporting and encouraging longer-terms investment in the economy. Disposals made on or after 6 April 2019 individuals will need to meet the qualifying conditions for two years to be eligible for the relief, up from the current 12 months. These conditions are set out in full on the gov.uk website.
It is best practice to speak with your personal tax advisor, but bear in mind that the following requirements:-
- Material disposal of business assets
- Disposal associated with a material disposal
- Disposal of trust business assets
If you dispose of any of the following you will qualify for entrepreneur's relief
- All or part of your business as a sole trader or business partner - including the business's assets after it closed. But you must have owned the business for at least one year
- Shares in a company where you have at least 5% of shares and voting rights, but you must have owned the business for at least one year before the date you sell or close it
- Assets you lent to your business or personal company
If you are selling all or part of your business, all the following must apply:
- You're a sole trader or business partner
- You have owned the business for at least one year before the date you sell or close it
- You sell or dispose of your business assets within three years after selling or closing the business
If you are selling shares, all the following must apply for at least one year before you sell your shares:
- You have at least 5% of shares and voting rights in the company
- You are an employee or director of the company (or one in the same group)
- The company's main activities are in trading (rather than non-trading activities like investment)
If you are selling assets you lent to the business all the following must apply:
- You have sold your part of a business partnership or your shares in a personal company
- You owned the assets but let your business partnership or personal company use them for at least one year up to the date you sold your business or shares