Entrepreneur Tax Relief
Entrepreneur Tax Relief
This relief gives a CGT rate of 10% on gains from the disposal of qualifying business assets. This is reduced from the normal rate of 33%.
There is a lifetime limit of €1 million on the gains that you can claim relief on. Only gains on disposals made on or after 1 January 2016 are counted in the limit.
The relief does not apply to disposals of:
- shares (other than shares that qualify for relief under this section), securities or other assets held as investments
- development land
- assets on the disposal of which no chargeable gain would arise
- assets personally owned outside a company, even where such assets are used by the company
- goodwill which is disposed of to a connected company
- shares or securities in a company where the individual remains connected with the company following the disposal.
How do you qualify for the relief?
You must have owned the business assets for a continuous period of three years. The three years must be in the five years immediately prior to the disposal. The business asset must be used for a qualifying business. In the case of shares, you must have owned at least 5% of the ordinary shares for a continuous period of three years. The three-year period can be at any time prior to the disposal.
Qualifying business assets
Qualifying business assets are:
- shares held by an individual in a trading company
- owned by a sole trader and used in their trade.
A qualifying business is a business other than the:
- holding of securities or other assets as investments
- holding of development land
- development or letting of land.
Qualifying business operated by a company
Where a business is operated by a company you must have owned at least 5% of the ordinary shares in either:
- the company
- a holding company of a qualifying group.
This means that the relief would not apply where:
- there is a dormant company in a group
- one of the subsidiaries is not a trading company.
Qualifying company operated by an individual
You must have been a director or employee of the qualifying company or companies in a qualifying group. You must have:
- spent no less than 50% of your time in the service of the company (or companies) in a managerial or technical capacity
- served in that capacity for a continuous period of three years. The three years must be in the five years immediately prior to the disposal of the business assets.
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