Measure
Entrepreneurs' relief (ER) allows taxpayers to benefit from a preferential capital gains tax (CGT) rate when disposing of certain assets (which typically includes a 5% shareholding in a private company or shares acquired under an Enterprise Management Incentive (EMI) scheme). In particular, where a gain qualifies for ER, the gain would be liable to CGT at a rate of 10% rather than the 20% rate that would otherwise ordinarily apply.
The Chancellor has decided not to abolish ER completely, but instead is reducing the lifetime allowance (the amount of gain which benefits from the 10% CGT rate) from £10m per individual to £1m.
This takes the allowance back to the level at which it was originally introduced in 2008. This will result in a reduction in the maximum benefit of the relief from £1m to £100,000 for individuals who realise gains that qualify for ER. This amendment will apply to all disposals taking place on or after 11 March 2020, as well as certain transactions which may have been undertaken already in anticipation of this change.
All taxpayers who were hoping to benefit on total lifetime gains in excess of £1m and had not completed the disposal prior to 11 March 2020.
With immediate effect.
While it will disappoint anyone adversely affected, the change is less drastic than the complete abolition of ER, which was widely anticipated. The retention of ER albeit in a much limited form is likely to better target the relief at those whom it had always been intended to benefit.