Who can claim Entrepreneur’s Relief?

Claiming Entrepreneur’s Relief could save you a substantial amount of money in capital gains tax.

Entrepreneur’s Relief is a government scheme that was introduced in 2008 as an incentive to encourage entrepreneurship.

The scheme reduces the amount of Capital Gains Tax paid by individuals disposing of business assets to just 10%.

Individuals that meet the qualifying conditions for Entrepreneur’s Relief can use the scheme when selling a business, shares in a company, or business assets.

Who can claim Entrepreneur’s Relief?

Entrepreneur’s Relief used to only be available to business owners, but since 2016 it has been extended to include external investors.

The scheme is now available to the following individuals providing they meet the eligibility criteria.

Sole traders and business partnersselling all or part of their business, providing that they have owned the business for at least 2 years prior to the sale.

Individuals holding at least 5% of ordinary shares and voting rights in a qualifying company, providing they have held their shares for at least 2 years prior to selling them.

Spouses of claimants– Individuals can gift shares to their spouse who can then make an additional claim for Entrepreneur’s Relief providing that they own at least 5% in shares and work as an employee in some capacity.

Entrepreneur’s Relief cannot be claimed by companies or trustees whose entire trust is a discretionary settlement.

Qualifying conditions

Entrepreneur’s Relief can only be claimed on the sale of a trading company, examples of non-trading companies include those in investment and property development.

You can find the full list of qualifying conditions on the HMRC website.

How to claim Entrepreneur’s Relief

Entrepreneur’s Relief can either be claimed through your self-assessment tax return, or by filling out Section A of the Entrepreneurs’ Relief help sheet.

If you’re not sure whether you are eligible to claim Entrepreneur’s Relief or need help making your claim, get in touch with our team of specialists here at Michael Bell Accountants by calling us on 01484 690 730.