This section has information on the qualifying conditions for claiming HMRC Entrepreneurs' Relief. Check how to pay less Capital Gains Tax after you sell or 'dispose of' a business (or part of it).
ENTREPRENEURS RELIEF QUALIFYING CRITERIA: You could pay tax at 10% on the gains of assets that qualify for Entrepreneurs' Relief. They include the disposing of:
Note: A trustee selling assets held in the trust may also qualify for HM Revenue and Customs Entrepreneurs' Relief.
If you sell all or a part of your business you must be sole trader or business partner. You must also have owned the business for a minimum of 12 months before the date that you sell it to qualify for Entrepreneurs Relief.
The same conditions of qualification also apply if you decide to close your business instead. In this case you must also dispose of the business assets within 36 months (3 years) to qualify for the same relief.
There are two main conditions to follow if you intend to sell your shares in the company. They must both apply for at least 12 months before selling the shares:
Beside those two stipulations, before you sell your shares, any of these two other conditions must also apply for at least one year:
Note: You can still qualify for Entrepreneurs' Relief if you sell your shares within 3 years even if the company ceases to be a trading company.
Both of these two condition apply if you sell assets that you lent to the business:
The method that you use to work out your tax will depend on whether all the gains are eligible for Entrepreneurs’ Relief.
Note: If you have other gains, the tax you pay on those depends on what Income Tax rates you pay and when you made your gain.
Higher rate Income Tax payers will pay 28% tax on gains made before the 6th of April 2016 that are not eligible for Entrepreneurs' Relief. On gains made from the 6th of April 2016 that do not qualify for Entrepreneurs' Relief you can expect to pay:
You can use the tax-free allowance against gains that would get charged at the highest rates (e.g. where you would pay 28% tax).
Basic rate taxpayers can use these steps to work out the tax rate that you can expect to pay on gains if they do not qualify for Entrepreneurs' Relief.
Note: You can either contact HM Revenue and Customs or seek professional help from a tax adviser.
There is a set process for claiming Entrepreneurs' Relief on a tax return. Most people will claim Entrepreneurs' Relief on Self Assessment tax returns.
Note: You can also fill in Section A of 'Entrepreneurs' Relief: HS275 Self Assessment helpsheet' 2020 version.
|Tax Year of Selling or Closing a Business||Deadline to Claim Entrepreneurs' Relief|
|Between the 6th of April 2020 to the 5th of April 2021||31st of January 2023|
|Between the 6th of April 2019 to the 5th of April 2020||31st of January 2022|
|Between the 6th of April 2018 to the 5th of April 2019||31st of January 2021|
Note: There is no limit on how many times you can claim for Entrepreneurs' Relief. But, the maximum amount of relief you can claim during a lifetime is £10 million.
How to Claim Entrepreneurs' Relief HMRC in United Kingdom