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Relaxation of investors’ relief rules

The new investors’ relief extends the 10% capital gains tax rate to gains on new shares subscribed for in unquoted trading companies. When it was proposed in the Budget neither the investor nor anyone ‘connected’ with the investor was going to be allowed be a director or employee of the ‘investee’ company. The Finance Act 2016 relaxes this slightly. An investor (or someone connected with them) may be an unremunerated director (provided they had no connection with the company before the investment was made) or only becomes an employee more than 180 days after the shares are issued where initially there was no reasonable prospect of them becoming an employee.

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