Capital gains tax entrepreneurs' relief
I recently came across a somewhat concerning anomaly in the tax position on entrepreneurs’ relief. There is a distinct difference in tax treatment between self-employed and employed individuals where their involvement with a business ceases.
A self-employed individual who has been in business for at least a year is entitled to entrepreneurs’ relief where he ceases to trade and subsequently disposes of his business assets within three years of the cessation date. However, where an individual is employed by, or a director of, a company and resigns as a director and then subsequently sell his shares, he has no entitlement at all to entrepreneurs’ relief as the legislation requires that he be an officer or employee as at the date of disposal.
This seems somewhat unfair and is hopefully something that will be addressed over the coming months.
What it does mean is that, with entrepreneurs’ relief now being worth £900,000 potentially, care must be taken for planning on any disposal to ensure that entitlement to relief is maintained.
Cathy Corns is a tax adviser and a partner at Mercer & Hole. The views given in this blog are personal to the author, if you would like to discuss the contents of this post with Cathy you can call her on 01908 605552.

