What is entrepreneurs’ relief?

Entrepreneurs' relief allows business owners to pay a lower rate of capital gains on the proceeds of business sales, compensating for the removal of the taper relief CGT regime after the 2008 Budget.

Since that time, there has been a fixed 18% flat rate of capital gains tax in the UK.

The entrepreneurs' CGT rate, for qualifying disposals, is effectively 10% for the first £2 million of business disposals. Alistair Darling doubled the previous £1m limit during the March 2010 Budget.

In order for business owners to qualify for the relief, they must meet the following conditions:

• Only individuals can claim entrepreneurs' relief - i.e. a sole trader, partnership, or a limited company shareholder.
• In order to qualify, you must have had ownership of the business for 12 months prior to the disposal, or for 12 months prior to the time when the business stopped trading.
• Relief can be claimed on the sale of all or part of a business, the sale of shares in a company, or on any business assets following the closure of a business.
• You can claim many times against the lifetime allowance of £2m. After this point, normal CGT rates will apply.

Any contractors or business owners in the enviable position to take advantage of this concession can find out more via this HMRC helpsheet here.