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Business Services  •  Business Tax  •  Capital Gains Tax  •  Entrepreneur's Relief  •  HMRC  •  Personal tax  •  Small Business  •  Tax Planning

Avoid the 2 common pitfalls shareholders make which disqualify them from tax relief

By RJP LLP on 5 September 2016

There are many reasons why entrepreneurs start a company and although making money isn’t always at the top of their list, it’s definitely a big factor. The government wants to encourage the creation of start ups and, presumably in return for all the risks and hardship entrepreneurs will encounter along the way, offers incentives in the form of tax reliefs. One of the most valuable of these reliefs is entrepreneurs’ relief for capital gains tax purposes. For qualifying entrepreneurs, this entitles them to a reduced capital gains tax rate of 10% (as opposed to the new main rate of 20%) when they sell the shares in their company.

Although we have seen unprecedented political change following the Brexit vote, leading to a new Prime Minister and a new Chancellor, we have not yet seen any indication that entrepreneurs’ relief will be removed, and it remains a very valuable form of tax relief for qualifying shareholders.

Entrepreneurs’ relief appears at face value to have very simple qualifying criteria attached to it, but it is this apparent simplicity that can sometimes trip people up. This recent article by Lesley Stalker highlights using two recent tax tribunal cases, how the tax aspects of a transaction can be overlooked, and the qualifying criteria for entrepreneurs’ relief can be inadvertently breached, as shareholders focus on commercial aspects.

Read the SmallBusiness.co.uk article on capital gains tax entrepreneurs’ tax relief to find out more. If you would like more information on selling a business and the tax implications, please contact Lesley Stalker.

Tax relief: Avoid the two common pitfalls that can disqualify you

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60 Day Deadline for CGT Returns and Tax Payments

If you sell a property and incur capital gains tax on the transaction, you will need to file a tax return and also pay any tax that is due within 60 days of completion, or penalties will arise. Need help with your property taxes? Talk to us.

There are many reasons why entrepreneurs start a company and although making money isn’t always at the top of their list, it’s definitely a big factor. The government wants to encourage the creation of start ups and, presumably in return for all the risks and hardship entrepreneurs will encounter along the way, offers incentives in the form of tax reliefs. One of the most valuable of these reliefs is entrepreneurs’ relief for capital gains tax purposes. For qualifying entrepreneurs, this entitles them to a reduced capital gains tax rate of 10% (as opposed to the new main rate of 20%) when they sell the shares in their company.

Although we have seen unprecedented political change following the Brexit vote, leading to a new Prime Minister and a new Chancellor, we have not yet seen any indication that entrepreneurs’ relief will be removed, and it remains a very valuable form of tax relief for qualifying shareholders.

Entrepreneurs’ relief appears at face value to have very simple qualifying criteria attached to it, but it is this apparent simplicity that can sometimes trip people up. This recent article by Lesley Stalker highlights using two recent tax tribunal cases, how the tax aspects of a transaction can be overlooked, and the qualifying criteria for entrepreneurs’ relief can be inadvertently breached, as shareholders focus on commercial aspects.

Read the SmallBusiness.co.uk article on capital gains tax entrepreneurs’ tax relief to find out more. If you would like more information on selling a business and the tax implications, please contact Lesley Stalker.

Tax relief: Avoid the two common pitfalls that can disqualify you