Entrepreneurs’ Relief for Longer-Term Investors
An unexpected but welcome new initiative announced in the budget was the extension of Entrepreneur’s Relief (ER) to would-be investors in unlisted trading companies.
Currently only directors and employees of a company can benefit from the ER rate of 10% on capital gains, but now outside investors can subscribe for new shares (after 17 March 2016) and claim ER. There is now no requirement to be an employee, director or officer or the company, and no requirement to hold at least 5% of the issued shares of the company.
The investor must hold the new shares for at least 3 years from 6 April 2016 in order to claim the relief.
There can be no guaranteed exits to the investment; in due course investors will have to sell their shares back to the company, or to a third party, in order to realise their capital gain.
But company owners will welcome this way to attract new capital into their companies, with an attractive tax benefit to their investors.