Changes to Entrepreneurs’ Relief (ER) are on the horizon

Last month the former head of HM Revenue and Customs called on the government, i.e. whichever party wins the general election, to scrap ER which he said was costing the country £2bn a year in lost tax yet provided “no incentive for real entrepreneurship”.

For those unfamiliar, broadly this relief allows many business owners to dispose of their businesses (often by way of a share disposal but the relief applies to unincorporated businesses too) and pay Capital Gains Tax at 10% rather than 20% on lifetime gains of up to £10m.

More recently Labour have pledged to abolish the relief (and increase CGT rates) and the Conservative manifesto promises a review and reform of ER.  

As a reminder ER has been subject to changes this year already, with the qualifying holding period extended from one year to two for disposals made after 5 April 2019 (unless it relates to a business which ceased to trade before 29 October 2018).

It seems pretty certain that changes to ER are coming and the relief could become less generous or even disappear.

The latter is perhaps unlikely under a Conservative government but if you are contemplating a disposal, or looking to wind up your business contact Alex Nicholson 02380 210 851.