The government are planning changes to Entrepreneurs relief, available when you sell your business. These changes will probably be announced in the budget on 11^th March and could apply to all sales after that date.

Hence is you are planning a sale then you need to be aware of any new rules.

The old existing rules

If you qualify then your capital gain tax bill will be just 10% on the whole gain, rather than 20% on gains in excess of your basic rate band.

To qualify you must have sold all or an identifiable part of your business

• If a sole trader or partner, then you must have been so for more than 2 years
• If selling shares, then the company’s main activities must have been trading and you must have been an employee or office holder for over 2 years

Holders of EMI shares can also qualify, as can holders of more than 5% of a company, if they have been for over 2 year. Some business assets can also qualify, and some trusts if the beneficiaries qualify.

In other words, there are a lot of possible criteria available for reform.

Finally, there is a lifetime cap on such relief of £10m, which is said to be too high.

New rules planned

Unfortunately, all the manifesto said was that this tax was to be subject to “review and reform” and no actual details have yet been released. The topic is however under discussion hence the need to be aware of the impact of potential changes.

There are many suggestions of how this relief may be changed to be more relevant i.e. to actively promote small business but not benefit those who are already rich.

Suggestions include

• Scrapping it all together i.e. doubling tax on sale of a business
• Reducing the lifetime limit to £1m to align with pensions savings

Whether the government exercise their commitment to prior consultation remains to be seen.