ER provides for a lower rate of CGT (10%) to be paid when disposing of all or part of a business where certain criteria are met. Prior to the announcement, the availability of ER was subject to a lifetime limit of £10 million of qualifying gains.
For UK financial advice professionals only, not approved for use by retail customers. Click here for the customer website.
PruAdviser online services will be unavailable from 18:00 on Saturday 20 April until 10:00 on Sunday 21 April for essential website maintenance. We apologise for any inconvenience caused.
1 min read 20 May 21
ER provides for a lower rate of CGT (10%) to be paid when disposing of all or part of a business where certain criteria are met. Prior to the announcement, the availability of ER was subject to a lifetime limit of £10 million of qualifying gains.
The Budget announcement reduces the lifetime limit from £10 million to £1 million for qualifying disposals made on or after 11 March 2020. There are special provisions for disposals entered into before 11 March 2020 that have not been completed.
According to the Government, this change ensures that over 80% of those using the relief will be unaffected.
Those affected are individuals who dispose of all or part of their business; individuals who dispose of shares in their personal company; and trustees who dispose of business assets, with gains above the new lifetime limit.
The changes to ER will increase the amount of tax paid for total lifetime ‘business’ gains over £1 million. Advisers and accountants can work together to extract value from these businesses prior to sale, for example through increased employer pension provision.
Financial advisers often encounter the potential availability of ER when dealing with corporate investment cases. Companies must be ‘mainly’ trading in the 24 months prior to sale if ER is to be potentially available. HMRC apply a 20% benchmark and therefore any investment activities must be kept within this to qualify for relief. Again, this is an area for collaboration between advisers and accountants.
Learn more about the changes to the Tapered Annual Allowance announced as part of the spring budget 2020 update with PruAdviser.
Explore corporation tax implications of a company investing in an insurance bond with PruAdviser. Find examples of UK bond investment accounting and more.
23 min read 13 Jun 23
Discover the three main ways to extract profits from a limited company and how these can be used to improve your client’s financial situation with PruAdviser.
15 min read 6 Apr 23
© Prudential 2024
"Prudential" is a trading name of Prudential Distribution Limited. Prudential Distribution Limited is registered in Scotland. Registered Office at 5 Central Way, Kildean Business Park, Stirling, FK8 1FT. Registered number SC212640. Authorised and regulated by the Financial Conduct Authority. Prudential Distribution Limited is part of the same corporate group as the Prudential Assurance Company Limited. The Prudential Assurance Company Limited and Prudential Distribution Limited are direct/indirect subsidiaries of M&G plc which is a holding company registered in England and Wales with registered number 11444019 and registered office at 10 Fenchurch Avenue, London EC3M 5AG, some of whose subsidiaries are authorised and regulated, as applicable, by the Prudential Regulation Authority and the Financial Conduct Authority. These companies are not affiliated in any manner with Prudential Financial, Inc, a company whose principal place of business is in the United States of America or Prudential plc, an international group incorporated in the United Kingdom.