This website uses 'cookies' to enhance your experience and for basic functionality. Using this website means you're happy with this. To find out more about cookies on this website, see our privacy policy.

Autumn Budget 2018: Changes To Entrepreneurs’ Relief

Alex McPherson

On 29 October 2018, the Chancellor of the Exchequer delivered the 2018 Autumn Budget to the House of Commons. The generous Entrepreneurs’ Relief scheme has survived, however the conditions for qualification have tightened.

Individuals that qualify for Entrepreneurs’ Relief are still only required to pay a flat rate of 10% on any taxable chargeable gain arising on the sale of shares (regardless of whether they are a basic, higher or additional rate taxpayer). To qualify, as was previously the case, the gain must still have arisen in respect of shares held in a trading company and the entrepreneur must have held at least 5% of both that company’s ordinary share capital and voting rights.

However, additional qualification criteria have been introduced in respect of shareholdings:

  • From 29 October 2018, shareholders must now also have been entitled to at least 5% of the company’s distributable profits and net assets (i.e. the assets that would be available on the winding up of the company) prior to the sale of its shares; and
  • For disposals on or after 6 April 2019, the minimum period throughout which the qualifying conditions for Entrepreneurs’ Relief must have been met prior to the disposal will change from 12 months to 24 months.

This extension of the qualifying holding period to 24 months will also apply to Enterprise Management Incentive (EMI) option holders, although the period during which options are held will be taken into account. However, there remains no minimum shareholding requirement in respect of shares acquired under an EMI option scheme; holders of EMI options may qualify for Entrepreneurs’ Relief irrespective of whether they own or are entitled to less than 5% of the company’s voting or economic rights.

These changes aim to “support longer-term business investments”, so are more likely to affect entrepreneurs looking for a quick exit. In practice, many entrepreneurs will automatically meet the additional shareholding percentages by virtue of the fact that they hold 5% of the share capital and voting rights, whilst longer-term planning can help to ensure that the “24 month” requirement is met.

You may also like...

Helen Burt explains how scale-ups can make outsourcing work in The Telegraph

Helen Burt argues that before you engage an outsourcing partner, it is important to protect your intellectual property

READ MORE

David Farquharson advises entrepreneurs at YFood House of Genius London event

David Farquharson advises entrepreneurs at YFood House of Genius London event as an advisory panelist, providing supportive input and creative ideas to food tech entrepreneurs.

READ MORE

Caroline Sherrington & Gretchen Lennon discuss share options in Tech City News

Caroline Sherrington & Gretchen Lennon discuss share options and implementing an appropriate scheme for employees in Tech City News

READ MORE

Alex McPherson speaks at the Thomson Reuters Entrepreneurial Law Firm Conference 2017

Alex McPherson presents on the future of law and what motivates millennials at the Thomson Reuters Entrepreneurial Law Firm Conference 2017

READ MORE

Caroline Sherrington shortlisted for ‘Legal advisor of the Year’ at the Women in Finance Awards 2017

Ignition Law Senior Counsel Caroline Sherrington has been shortlisted for 'Legal advisor of the Year' at the Women in Finance Awards 2017

READ MORE

GDPR – The new data privacy law: What you need to know and how we can help

GDPR is a new privacy law which governs the collection and use of data relating to all individuals within the EU. It will give people more rights and protection around how their personal data is processed, used and shared between and by organisations. It introduces tougher fines for non-compliance and gives people more say on what companies can do with their data. It also makes data protection rules more or less identical throughout the EU.

READ MORE

all posts