The measure

Where Entrepreneurs' Relief ('ER') is available on the disposal of a business or interest in a business, taxpayers may pay a reduced rate of capital gains tax ('CGT') at 10% on qualifying gains up to a lifetime limit of £10m of gains. The relief can also be claimed where someone disposing of a business sells other assets used by the business at the same time ('associated disposals'). Changes to combat abuse of the ER rules in 2015 inadvertently resulted in relief not being due on 'associated disposals' when a business was sold to members of the taxpayer's family under normal succession arrangements.

The new rules will permit relief to be claimed on 'associated disposals' to a family member that are linked to disposals of interests in partnerships provided the person making the disposal is disposing of at least 5% of the business and the transactions are part of a genuine succession arrangement. Similar changes will apply where the business is held by a limited company.

Who will be affected?

The change will affect individuals who are members of partnerships or unlisted companies that carry on trades and also hold other assets used in businesses where they are handing on the business to the next generation.

When?

The changes will effectively be backdated to cover disposals on or after 18 March 2015.

Our view

The Government had already announced that it would be looking at this area in light of the impact of the 2015 changes and this is a welcome revision to the rules.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.