What Is The New Relief?
After business leaders voiced their objections to the abolition of taper relief, the Chancellor has introduced a new Entrepreneurs’ Relief (ER). ER may be available for disposals, reorganisations and relevant transactions taking place on or after 6 April 2008.
The main effects of this relief are:
- an individual will be able to make more than one claim for relief, up to a lifetime total of £1m of gains;
- the first £1m of gains qualifying for relief will be charged at an effective rate of 10%; and
- gains in excess of £1m will be charged at 18%.
The new relief is similar to Retirement Relief, which was phased out with the introduction of taper relief, but under the new rules:
- there will be no minimum age limit; and
- relief will generally be available where the relevant conditions are met for a period of one year.
ER - impact
The effect of the relief is to reduce the gains liable to CGT at 18% by 4/9ths, resulting in an effective rate of 10% (18% x 5/9ths). The relief will be available for gains of up to £1m for qualifying disposals by an individual throughout their lifetime. The impact of this new relief on qualifying disposals can be seen in the following table (ignoring the annual exemption). |
| |
| |
Gain |
Qualifying for ER |
Amount of ER |
Chargeable gain |
Tax |
Effective rate |
|
| |
250,000 |
250,000 |
111,111 |
138,889 |
25,000 |
10% |
|
| |
500,000 |
500,000 |
222,222 |
277,778 |
50,000 |
10% |
|
| |
750,000 |
750,000 |
333,333 |
416,667 |
75,000 |
10% |
|
| |
1,000,000 |
1,000,000 |
444,444 |
555,556 |
100,000 |
10% |
|
| |
1,250,000 |
1,000,000 |
444,444 |
805,556 |
145,000 |
11.6% |
|
| |
1,500,000 |
1,000,000 |
444,444 |
1,055,556 |
190,000 |
12.7% |
|
| |
1,750,000 |
1,000,000 |
444,444 |
1,305,556 |
235,000 |
13.4% |
|
| |
2,000,000 |
1,000,000 |
444,444 |
1,555,556 |
280,000 |
14% |
|
| |
3,000,000 |
1,000,000 |
444,444 |
2,555,556 |
460,000 |
15.3% |
|
| |
4,000,000 |
1,000,000 |
444,444 |
3,555,556 |
640,000 |
16% |
|
| |
5,000,000 |
1,000,000 |
444,444 |
4,555,556 |
820,000 |
16.4% |
|
|
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