There were many predictions before this week’s Budget that the Government considered that the 10% capital gains tax rate that applies to the first £10m of gains made by entrepreneurs on business assets was too generous and would be reined in.

As it happened, the rules for the relief were altered, but the main planks described above were left untouched, much to the relief of business owners. The changes that were made were:

  • The “qualifying period” before disposal of the business or shares, during which the vendor needs to be an officer or employee and own 5% of the shares (in the case of company shareholders), and during which the business must have been trading has been extended from one year to two years. This measure will not have a major general effect on most business disposals which will have met the two year criteria anyway.
  • The rights of qualifying shares will need to encompass 5% of distributable profits and net assets in addition to control. This is the normal situation, and will therefore not affect most business owners.
  • As previously announced, the relief was extended to those who own less than 5% of shares in situations where they previously did have that level of ownership, but where that level had been reduced owing to commercial arrangements being put in place (such as share issues diluting their holding).

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Author: Peter Hedgethorne, Director, Plus Accounting

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