As widely predicted the Chancellor did make some changes to Entrepreneurs’ Relief that take effect for any transactions dated on or after 11 March 2020.
Unfortunately, there are some very well drafted anti-avoidance provisions that aim to block any tax advantage for transactions carried out before the Budget with a view to protecting entitlement to Entrepreneurs’ Relief.
For any disposals after 10 March, the limit on gains eligible to be taxed at 10% is reduced to a lifetime cap of £1 million (down from £10 million). It does appear that the other eligibility tests on percentage ownership, employment, etc. remain in place.
Based on the information available, there is good news for employees acquiring shares under Enterprise Management Incentive options, who will continue to qualify for Entrepreneurs’ Relief (albeit at the new limit of £1 million).
The change could potentially cost business owners up to £900,000 in terms of extra tax on a sale at £10 million or more.
If this impacts on you and you would like to discuss tax planning in relation to a disposal, please get in touch with me or a member of our Corporate and Business Tax team.