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Entrepreneurs’ Relief

Posted on 9th December 2015 in Legal Updates

Recent figures show that merger and acquisition activity rose by a third over last year and that the UK accounts for almost half of the total deal value in Europe. Potential interest rate rises are likely to reduce the volume of deals over the next few years.

When setting up and running a business it is all too easy to concentrate on what you are trying to do day to day but it is also important to take account of a future exit strategy, be it to sell the business or pass it on to family or others, and the consequent personal tax considerations.

On the disposal of a business or assets used for it, the key tax consideration is usually entrepreneurs’ relief from capital gains tax. Under this relief, qualifying gains are subject to capital gains tax at the reduced rate of 10% within a lifetime limit of £10 million per individual.

If relevant businesses or assets are transferred in a lifetime or retained until death, business property relief (BPR) wholly relieves their value from inheritance tax.

The qualifying rules for these two reliefs are different and may mean that it is not possible to structure matters to achieve one, without prejudicing the availability of the other.

It is important to consider future intentions to work out the best structure for the business and ownership of the assets used in it well before any disposal, to secure as much relief as possible taking into account which is most likely to be pertinent.

Business owners can also ensure that their wills include provisions to crystallise BPR on death and optimise the position for the future, allowing for whether the business is likely to cease or continue.

For more information please contact Eamonn Daly on 01789 206142 or at

Eamonn Daly, Lodders Solicitors

Eamonn Daly, Lodders Solicitors

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