Budget 2020 analysis: Entrepreneurs’ Relief

MHA Moore and Smalley tax specialists provide an analysis of the announcements made by Chancellor Rishi Sunak in his first budget on 12 March 2020. In this blog we review the sweeping changes made to Entrepreneurs’ Relief.

It was announced in the Chancellors’ Budget that the lifetime limit for Entrepreneurs Relief (ER) will be slashed to £1,000,000 from £10,000,000 which is likely to impact a significant number of business owners.

ER provides for a 10% tax rate on certain capital gains, including the disposal of shares in a trading company. The new limit will apply to disposals on or after 11 March 2020.

The new rules will take into account the value of previous claims to ER, meaning if you have previously realised ER gains of more than £1,000,000 you will have now maximised your lifetime limit and ER will not be available on any future disposals.The £1,000,000 limit will also apply to certain contracts entered before Budget day that were designed to ‘lock-in’ the £10,000,000 limit and certain ‘share for share’ exchanges. Individuals who have made a disposal in the current tax year (2019-20) should take advice as to whether any of these anti-forestalling rules apply.

For any further advice on the Budget 2020 announcement, please contact a member of our tax team