It was no real surprise that in his June emergency Budget, George Osborne increased the rate of Capital Gains Tax from 18% to 28%. In fact, many had expected it to be a aligned with income tax and be charged at up to 40 or even 50%; so the new 28% rate was a bit of a relief.
For those whose gains qualify for Entrepreneurs' Relief, the news has just been getting better and better all year. This started in March 2010 when Alistair Darling announced that the lifetime limit on gains which qualify for the relief would increase from £1million to £2million. It got even better in June when George Osborne announced that that £2million life time limit would in fact be increased to £5million. For a married couple this means that they could achieve a 10% Capital Gains Tax rate on qualifying gains up to a value of £10million.
With this substantial increase in the limit, it becomes more important to ensure that it is fully used and that no action is taken by the individual which prejudices its availability.
For those who currently hold shares that do not qualify for Entrepreneurs’ Relief because they do not hold sufficient shares in their employer’s company (broadly 5%) for at least one year we can provide a solution. With suitable planning and depending on the circumstances it is possible for an individual to qualify for Entrepreneurs' Relief even if he or she does not hold the requisite number of shares. This could represent a considerable saving in Capital Gains Tax particularly if, as is possible, the rate of Capital Gains Tax increases beyond 28% in the future.
Another vexed question for those considering eligibility for Entrepreneurs’ Relief is whether or not to charge rent to their business or company for a property that they own personally and which is used by that business or company. Many believe that, in order to qualify for the relief, they should stop charging rent. This is not always the case particularly when the property in question has been held for a number of years. This is a complicated area and one in which we are able to give detailed analysis and advice.