Newsletter issue - July 2020.
The Spring Budget 2020 announced a significant restriction on future availability of entrepreneur's relief (ER) for individuals who dispose of all or part of their business, individuals who dispose of shares in their personal company, and trustees who dispose of business assets.
Broadly, the changes will increase the amount of tax payable by a business sold at a profit of over £1m. For potential sale profits at or around this limit, careful planning may be needed to extract value from the business prior to sale, for example through increased employer pension provision, to bring the chargeable gain within the revised limit.
The Spring Budget also announced that ER is to change its name to business asset disposal relief (BADR).
When an individual disposes of an asset at a gain, capital gains tax may be due. Ordinarily, for gains falling above the higher-rate threshold (£50,000 in 2020/21), this will be charged at a rate of 20%. However, if certain conditions are met, BADR may be available and the chargeable rate be reduced to 10%. Broadly, the lifetime limit of £10m is reduced to £1m for disposals on or after 11 March 2020 (for disposals between 6 April 2011 and 10 March 2020, the lifetime limit on gains qualifying for ER was £10 million). The measure also provides that the lifetime limit must take into account the value of ER claimed in respect of qualifying gains in the past.
The limit is a lifetime threshold and claims may be made against it on more than one occasion.
Selling all or part of a business
To qualify for BADR, both of the following conditions must apply:
The same conditions apply if the business is closing rather than being sold. The business assets must be disposed of within three years to qualify for relief.
Selling shares or securities
To qualify, both of the following conditions must apply for at least two years before the shares are sold:
There are other rules depending on whether or not the shares are from an Enterprise Management Incentive scheme (EMI).
Selling assets previously lent to the business
To qualify, both of the following must apply:
As a valued member of our community, we appreciate the trust you place in us to make sure all your critical services continue.
We are committed to an evidence-led and common-sense approach to containing the coronavirus outbreak and mitigating its impact on employees, customers and our wider business operations.
Please be assured we are preparing for our services to continue as normal. We have business continuity plans in place to minimise the risk of infection and make sure we can continue to deliver a business-as-usual service to our customers should an infection occur at an office. These include implementing clear guidelines for employees, providing support and advice for anyone who needs to self-quarantine, and issuing guidance on following safe hygiene practices across the organisation.
You can find further information on Covid-19 below to keep you updated: