The Government announced a new tax relief for external investors (Investors’ Relief) in unlisted trading companies in this year’s Budget, to be introduced by the Finance Bill 2016. This is all part of its drive to help companies gain access to capital to expand, create jobs and foster more entrepreneurial activity.
This new relief extends Entrepreneurs’ Relief and applies a 10% rate of Capital Gains Tax (CGT) with a lifetime limit for individuals of £10 million. In addition, rules will ensure that this relief will be available for beneficiaries of trusts.
Investors’ Relief
Investors’ Relief will apply to disposals of qualifying shares (newly issued ordinary shares and fully paid in cash) that were acquired on or after 17 March 2016 and held by individuals (other than employees and officers of the company) for a period of at least three years starting from 6 April 2016. Unlike Entrepreneurs’ Relief, there is no minimum shareholding required.
The conditions for Investors’ Relief, at least at this early stage, appear less stringent than for EIS and may be a better alternative for private individuals who may also continue to benefit from Entrepreneurs’ Relief. However, as part of the government’s efforts to create a strong enterprise and investment culture, the relief must be subscribed for by individuals for genuine commercial purposes and not for tax avoidance purposes. The Government’s avoidance rules set out in the FB16 legislation will apply.
Learn more about the Government’s Policy paper here.
To find out more about Investors’ Relief or discuss private client related issues, please email privateclient@bishopandsewell.co.uk, or call 020 7631 4141 and ask to speak to Helen Langworthy from the Private Client team.
