Investment Relief was introduced in 2016 to encourage investment and entrepreneurial activity in the UK. In this article, Jill Springbett explains a relief many people may have forgotten exists.
Shares subscribed for on or after 17 March 2016 may qualify for the new Investors’ Relief from Capital Gains Tax. To qualify for the relief, the shares must be held for at least three years and sold after 6 April 2019.
The relief gives a rate of 10% on gains, with a £10m lifetime limit on gains that can be relieved.
The £10m limit on Investors’ Relief is separate from the Entrepreneurs’ Relief (ER) limit of the same amount and can be used in addition to the ER limit. Using both reliefs would allow the 10% CGT rate to apply on gains of up to £20m on qualifying investments.
The two reliefs have different aims, with different rules. Generally, you would use the reliefs on disposals of different assets. However in some (unusual) circumstances it is possible to qualify for both reliefs on the same asset.
Importantly, for Investors’ Relief the individual must not have been an employee or paid director at the time of subscription for shares. Subject to various conditions, it may be possible to be an unpaid director or to become employed later as long as employment was not in prospect when the shares were bought.
The shares must be in an unquoted trading company, or an unquoted holding company of a trading group.
The shares must have been acquired by subscription rather than purchase. There are detailed requirements in order to qualify, similar to those for Enterprise Investment Scheme relief.
It is worth considering the relief when you are setting up a new company.
If you think you may qualify for Investors’ Relief or would like to find out more about it, please contact Jill Springbett.
Warning: The above is merely general guidance and should not be relied upon as formal advice. The advice we give to each client will depend on their specific circumstances. We suggest you take professional advice before taking any action in relation to the issues discussed above.