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Do you qualify for Entrepreneurs’ Relief?

To consider whether you are eligible for Entrepreneur’s Relief (“ER”) you need to discuss this with advisors at an early stage and get the ownership of your company in order before you consider selling and certainly before you retire from working at the Company.

Knowing that you and other shareholders qualify for ER, including valued employees who hold minority shareholdings, means peace of mind should someone want to buy, whether it is a planned sale or an unexpected offer.

This valuable relief reduces the rate of tax to 10% on gains of up to a lifetime limit of £10 million and is designed to benefit those who create and develop economic growth. However all too often issues jeopardising the availability of ER are only identified when advising on an imminent disposal. This is frequently too late to remedy the problem and can be a costly mistake.

The availability of ER hinges on satisfying many of the relevant conditions for at least 12 months before a disposal, so time is of the essence.

This may be even more relevant than ever. There are concerns amongst some tax practitioners that ER in its current form, could be amended depending on how the political wind blows.

In the Treasury’s consultation document “Financing Growth in Innovative Firms”, published in August 2017, it states that HMRC are “undertaking quantitative research to further understand the impact on behaviour of Entrepreneurs’ Relief”. The fact that ER is coming under scrutiny itself adds to uncertainty.

If you are thinking of selling your Company in the next few years we recommend you speak to us and let us help you to make sure you and your fellow shareholders are able to take advantage of Entrepreneurs’ Relief.

Written by Frances Evans

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