Entrepreneurs, who are individuals, can claim relief up to a certain maximum limit on qualifying gains made on disposal of a) all or part of a business, b) the assets of a business after it has ceased trading or c) shares in a company from 2008-09 onwards. The relief is also available to trustees in certain cases. Limited to £1 million up to 05 April 2010, the relief was raised to £2 million from 06 April 2010 and the June budget raised it to a maximum of £5 million from 23 June 2010. Claims could be made so long as the aggregate qualifying gains do not exceed the lifetime limit of £5 million.
For the tax year 2010-11 different capital gains tax rates and entrepreneurs’ relief limits apply for the period from 06 April 2010 to 22 June 2010 and from 23 June 2010 to 05 April 2011.
This relief provides individual businessmen who own small businesses with great tax planning opportunities when they plan to sell their businesses. However, it is important to consider the tricky conditions. Broadly the following conditions must be met:
· The individual must have been an officer (director, company secretary etc) or employee of the company
· The company must have been the individual’s personal company
· The company must be a trading company
· These three conditions must be met during the last 12 months ending with the date of disposal
Personal company is a company in which the individual holds at least 5% of the ordinary share capital and at least 5% voting rights by virtue of such holding.
