ENTREPRENEURS RELIEF AND PROPERTY SALES – WHAT YOU NEED TO KNOW

Chris Annis, director LB Group

Chris Annis, director LB Group - Credit: Archant

Tax Matters with Chris Annis, director LB Group

A quick recap – what exactly is Entrepreneurs Relief?

Well, this is a relief available to reduce the amount of Capital Gains Tax you pay on the disposal of a qualifying business asset. The relief is available to Sole Traders or Partners in a Partnership who sell or gift away the whole or part of their business, and Company Directors with 5% or more shareholding in the Company who sell or gift away all or part of their shareholding.

The relief basically means that you pay Capital Gains Tax at a rate of 10% so it is very beneficial.

Conditions apply of course, but to claim the relief, you first have to make a material disposal of a business asset or make a qualifying associated disposal. Such assets are property or shares, and these assets have to be relevant to the business and used for business purposes.

An associated disposal is one where an asset is sold after the material disposal of an asset. For example, the disposal of a property owned by an individual where this has been provided for use in a trade or partnership of which he is a member, or was used by their personal company in its trade.

Landlords take note!

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One fundamental point to remember is that there are potential restrictions to qualifying for Entrepreneurs Relief on Associated Disposals or if you are a landlord, this may affect you, even if you are only a ‘landlord’ because you rent your premises to your own trading company.

You may not personally qualify for the full Entrepreneurs Relief, and the 10% tax rate, on the whole of the gain from the sale of the property if you have charged rent either at commercial rates or less than market value.

If you rent premises to your own company that you personally own then this scenario potentially affects you, however, there is a potential tax saving to be made by sensible planning. Please contact LB Group on 01473 359720 or email Ipswich@lbgroupltd.com to discuss this, or any other tax planning opportunities.

Please note the above does not constitute financial advice and LB Group cannot be held responsible for any errors or omissions.

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