Chris Wallace provides an Entrepreneurs' Relief (ER) case study to show how recent changes could affect your business.
Chris Wallace, Managing Director of Visionary Accountants, St Albans, Hertfordshire said:
'Last year the Chancellor announced some additional conditions that must be met in order to obtain Entrepreneurs' Relief (ER). Some conditions were introduced last year but the remaining ones applied from 6th April 2019. The changes mean that businesses must pay even closer attention to the rules to ensure eligibility.'
Read the full Entrepreneurs’Relief article
To understand what ER is and how your business might be affected we recommend you read our full article – Changes to Entrepreneurs’ Relief
Entrepreneurs' Relief Example
Shares in Crolles Breweries Ltd are owned by two husband and wife teams, Eric (40%) and Eva (10%) Rocher; and Clive (40%) and Laetitia (10%) Ferrand. Eric and Clive are company directors. Eva and Laetitia do not work in the company; nor are they office holders.
An unexpected offer is made for Crolles on the basis of a quick sale. As things stand, the husbands will qualify for ER on their shares, but the wives will not - they aren’t officers or employees and cannot be so for the two year qualifying period.
Here however, Eva and Laetitia could consider transferring shares to their husbands, with the husbands making the disposal (intra-spouse transfers are on a no gain/no loss basis for CGT). This will only be of use up to a value of £10 million on each husband’s disposal.
- Bringing other family members into the company can also maximise ER - again paying regard to time limits, employment and share ownership rules. But note that share transfers between family members can have CGT consequences.
- It is possible to obtain ER where the company ceases to trade; such as when you want to retire and withdraw accumulated funds from the company. If the company is liquidated, distributions to you in a liquidation may qualify for ER. The distributions are treated as part disposals of the shares and, although the company is not trading, ER will still be available if the distributions take place within three years of that cessation. All 5% and officer/employee conditions must be met in the two years leading up to cessation. The period remains one year if the company ceased trading before 29 October 2018.
Chris Wallace, Managing Director, Visionary Accountants, St Albans, Hertfordshire said:
‘As the Entrepreneurs’ Relief changes have now been introduced we have informed all our clients who may be affected by these changes. We are working with businesses to ensure that they can claim ER going forward. If you think your business could be affected we recommend you read our full article – Changes to Entrepreneurs’ Relief, and then contact a member of the Visionary Accountants team on 01727 730550 or complete our booking form. We offer a free initial consultation to discuss ER and how it affects your business.'