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Capital gains tax - Budget changes

Entrepreneurs’ Relief - Joint Ventures and Partnerships

The definition of a ‘trading company’ and ‘trading group’ will be changed for individuals and trustees realising gains in a company that invests in a joint venture company. Where the new definitions apply, a fraction of the activities of a joint venture company will be treated as carried on by a company which holds shares in the joint venture company. Similarly, the trading activities of a corporate partner will be taken into account in deciding whether the company is a trading company for entrepreneurs’ relief purposes. The measure will apply to disposals on or after 18 March 2015.

Entrepreneurs’ Relief - Long-Term Investors

Entrepreneurs’ relief (ER) will be extended to external investors (other than employees and directors) in unlisted trading companies. The extension of ER will apply to gains accruing on the disposal of ordinary shares that were newly issued to the claimant for new consideration after 16 March 2016, and have been held for a period of at least three years starting from 6 April 2016. There will be a lifetime limit of £10 million, distinct from the same limit that applies to the existing ER.

Entrepreneurs’ Relief - Goodwill on Incorporation

Individuals who incorporate their business will be able to claim entrepreneurs’ relief on the gain on goodwill, provided the new company is a close company (controlled by five or fewer participators or by its directors) and the individual holds less than 5% of the acquiring company shares. The measure has been backdated and applies to disposals from 3 December 2014.

Entrepreneurs’ Relief - Associated Disposals

Individuals who realise gains on the disposal of a private asset, which is used in a business carried on by their partnership or company once they retire or reduce their participation in their business, will be able to claim entrepreneurs’ relief on the ‘associated disposal’ if the disposal is to a family member. The measure will apply to disposals from 18 March 2015.

Specific advice should be obtained before taking action, or refraining from taking action, on any of the subjects covered above. If you would like advice or further information, please speak to your usual Shipleys contact.
 

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