Investors’ relief restriction runs out this tax year
Investors’ relief, effectively an extension of entrepreneurs’ relief for external investors, is now only available for disposals made during 2019/20 because of a three-year holding period requirement.
Like entrepreneurs’ relief, investors’ relief (introduced in 2016) gives a reduced rate of CGT of 10% for gains on qualifying share disposals by individuals or trustees. There is the same, but entirely separate, £10 million lifetime limit. However, investors’ relief is squarely aimed at external investors in unquoted trading companies. One of the requirements is indeed that the investor (or an individual connected with them) must not be an employee or a director of the company whilst owning the shares (although there are certain exceptions to this, such as being an unremunerated director).
The relief is intended to encourage and reward new investment, so there are conditions to ensure that the shares are subscribed for with new money that benefits the company.
As is often the case with tax reliefs, these conditions are quite complex. Broadly, shares must be:
- Ordinary shares in a trading company which are not listed on a stock exchange
- Issued on or after 17 March 2016 (the date the relief was announced).
- Acquired by subscription (rather than purchased from another shareholder) and fully paid up for cash
- Owned for at least three years after 6 April 2016.
We’re still early in the tax year, but if you may benefit from investor relief in 2019/20, some forward planning might come in useful.Talk to Barnes Roffe today