Are you aware of the tax reliefs you might qualify for? Okay, I know what you are thinking, you only just started the company and you are not planning to sell your shares yet! Of course not! I just wanted to make you aware there are some reliefs if/when you are selling. The legislation might change so keep reading my posts or check the government website for any changes.
It’s called ENTREPRENEURS’ RELIEF and you might be able to pay less Capital Gains Tax when you sell all or part of your business. The rate you will pay tax at is 10% on all gains on qualifying assets.
To qualify for the tax reliefs
You’ll dispose of any of the following:
- All or part of your business as a sole trader or business partner.
- Shares or securities in a company where you have at least 5% of shares and voting rights (known as a ‘personal company’).
- Shares you’ve got through an Enterprise Management Incentive (EMI).
- Assets you lent to your business or personal company.
If you are selling both or part of your business, to qualify for the tax reliefs you must also:
- Be a sole trader or business partner.
- You’ve owned the business for at least one year before the date you are selling it.
The same conditions will apply if you are closing the company instead.
IMPORTANT TO REMEMBER!!
You must also dispose of your business assets within 3 years to qualify for tax reliefs!
If you are selling shares or securities
the following conditions must apply:
- You are an employee or officer of the company.
- The company’s main activity is in trading.
- And either of the following must apply:
o You have at least 5% shares and voting rights in the company (if they are EMI shares)
o You’ve had them for a year before selling (if they are EMI)
If you are selling assets you lent to your business the following must apply:
- You’ve sold at least 5% of your part of a business partnership or your shares in a personal company.
- You owned the assets but let your business partnership or personal company use them for at least one year up to date you sold your business or shares – or the date the business closed.
1. Entrepreneurs’ Relief
Pay 10% Capital Gains Tax if you sell shares in a company where you have at least 5% of ordinary shares and voting rights.
2. Gift Hold-Over Relief
Pay no Capital Gains Tax if you give away shares in a personal company or unlisted company – the person you gave them to pays tax when they sell them.
3. Enterprise Investment Scheme (EIS)
Delay or reduce your Capital Gains Tax if you use a gain to buy unlisted shares in companies approved for EIS.
4. Seed Enterprise Investment Scheme (SEIS)
Pay no Capital Gains Tax on a gain of up to £100,000 if you use a gain to buy new shares in small early-stage companies approved for SEIS.
Delay paying Capital Gains Tax if you sell unlisted shares to the trustees of a Share Incentive Plan (SIP) and use the proceeds to buy new assets.
For more information check the government website.
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