Budget 2016: Entrepreneurs' relief extended

Entrepreneurs' tax relief has been extended to include long-term investors in unlisted companies, as revealed in Chancellor, George Osborne's Budget 2016 in the House of Commons yesterday lunchtime.

Entrepreneurs' relief applies to business owners seeking to sell on their business, who are eligible for a preferential tax rate of 10 per cent on business gains of up to £10 million.

As part of the new ruling, entrepreneurs will be able to secure a 10 per cent rate of capital gains tax on newly issued shares in unlisted companies bought on or after 17th March 2016; providing they are held for at least three years from 6th April 2016.

These will also be subject to a separate lifetime limit of £10 million of gains.

This will allow individuals to finance a business and obtain the 10 per cent entrepreneurs' rate without having to work in the business itself. Indeed an individual could qualify for £20m at the entrepreneurs' rate of 10 per cent relief if they invest and work in one business and provide finance to another.

The Budget documents stated: “This Budget continues to lower taxes, with new support for small business and entrepreneurs, while also modernising the tax system and taking steps to ensure that taxes are fair and are paid.”

Mr Osborne added that the Government would be allowing entrepreneurs' relief to be claimed on the disposal of privately held business assets to a family member; whilst allowing for tax reliefs in joint business ventures and partnerships where the existing five per cent minimum holding conditions are not satisfied.

It appears that the extension of the relief won't actually earn the Treasury any more revenue in 2016-17. However, it will recoup upwards of £5 million in 2017-18 before costing the exchequer £25 million in 2018-19, £40 million in 2019-20 and £60 million in 2020-21.

If you missed the Chancellor's Budget 2016 speech, don't panic. Click here for a comprehensive round-up of the key talking points relating to the UK's small business community.

Date published 17 Mar 2016 | Last updated 17 Mar 2016