Business Tax Relief
If you’re self-employed there is every chance that you will already be aware of the various types of business tax relief which are available to you. Typically, you will have various running costs and expenses associated with your business and you will be allowed to take these costs and expenses away from your business income to work out your profit, and produce accounts. You may also be able to get ‘capital allowances’ for certain other costs, like machinery, which will also reduce your taxable profits.
Through our investment opportunities, if you own your business, are a partner, or own shares in a business, you may be entitled to entrepreneurs tax relief which reduce your Capital Gains Tax bill. Capital Gains Tax is due when you sell, give away, exchange or otherwise dispose of business assets.
If you sell or close your business, you may be able to claim Entrepreneurs’ Relief – this means that you only pay 10% Capital Gains Tax on any qualifying profits.
There’s no limit to how many times you can claim Entrepreneurs’ Relief, and you can claim up to £10 million of relief in total during your lifetime.
To claim Entrepreneurs’ Relief you must:
- own at least 5% of the shares in the business for a year
- be a director, partner or employee of the business
To claim Entrepreneurs’ Relief you must have been trading for at least a year.
The rules for each relief are different. Some assets may count as business assets for one relief but not for others. You have to claim some reliefs and you get others automatically if you are entitled.
This guide will help you understand what Capital Gains Tax reliefs could be available to you and where to find more information.
Entrepreneurs’ Relief allows individuals and some trustees to claim relief on qualifying gains made on the disposal of any of the following:
- all or part of a business
- the assets of a business after it has stopped trading
- shares in a company
The relief applies for the years 2008-09 onwards. There is a maximum lifetime limit of Entrepreneurs’ Relief you can claim.
The relief is available for you as an individual if you:
- are in business, for example as a sole trader or as a partner in a trading business
- hold shares in your personal trading company
See the glossary links below for more on personal and trading companies. The relief is also available for some trustees although it is not available for companies.
Conditions you must meet
Depending on the type of disposal, you need to meet certain qualifying conditions throughout a qualifying year.
For example, you must have owned the business during the year that ends:
- on the date your business was disposed of – if you’re selling all or part of your business
- on the date your business ceased – if your business has ceased
How the Relief Works
You can make claims for Entrepreneurs’ Relief on more than one occasion. The total qualifying gains in all your claims must not exceed the lifetime limit.
Capital Gains Tax is due at 10 per cent on all qualifying gains up to the maximum lifetime limit.
For further information please visit the HRMC website.
If you would like any further information regarding the business tax relief which is available, please give us a call on Tel. No. (0)20 7015 2150 and we will be happy to answer any of your questions.