10 / 16
CAPITAL TAXES
CAPITAL GAINS TAX RATES
The rates of capital gains tax (CGT) are
changing for disposals of relevant assets
made on or after 6 April 2016:
•
the 18% rate of CGT, which applies
to individuals who are not higher rate
taxpayers, will be reduced to 10%
•
the 28% rate of CGT will reduce to 20%
•
disposals of residential property that do
not qualify for private residence relief
and the receipt of carried interest will
continue to be taxed at the 18% and
28% rates of CGT
•
provisions will be introduced to enable a
taxpayer to use any unused income tax
basic rate band in the most
beneicial way.
ENTREPRENEURS’ RELIEF:
EXTENSION TO LONG TERM
INVESTORS
Entrepreneurs’ relief will be extended
to external investors in unlisted trading
companies. This new relief will apply
a 10% rate of CGT to gains accruing
on ordinary shares in an unlisted trading
company held by individuals that were
newly issued to the claimant and acquired
for new consideration on or after
17 March 2016, and have been held for
at least 3 years from 6 April 2016.
There will be a lifetime cap for investors
of £10,000,000.
ENTREPRENEURS’ RELIEF ON
ASSOCIATED DISPOSALS
Finance Act 2015 introduced new rules
to combat abuse of entrepreneurs’ relief
but they had unintended consequences
which prevented entrepreneurs’ relief being
available on associated disposals when
a business was being sold to a member
of the family as part of the succession
planning for the business.
Legislation will be introduced in Finance
Bill 2016 to amend the deinitions of
‘partnership purchase arrangements’
and ‘share purchase arrangements’
for entrepreneurs’ relief purposes by
excluding the material disposal itself
and arrangements which predated both
the material disposal and an associated
disposal and are independent of the
material disposal.
The legislation will be backdated and will
apply to associated disposals made on
or after 18 March 2015.
The requirement that the material disposal
of business assets is 5% or more of
the claimant’s share in the company or
partnership does not apply where the
claimant disposes of the whole of the
interest and has previously held a
larger stake.
EMPLOYEE SHAREHOLDER
STATUS EXEMPTION
Employee shareholder shares issued as
consideration for entering into employee
shareholder agreements after midnight on
16 March 2016 will be subject to a lifetime
limit of £100,000 exempt gains for the
purposes of CGT.
Gains in excess of the limit will be subject
to CGT at the prevailing rate. Any employee
shareholder shares that were issued before
midnight on 16 March 2016 will not be
subject to any lifetime limit when sold.
If any employee shareholder shares are
transferred to a civil partner or spouse, the
transfer will be treated as being made for
a consideration which gives rise to a gain
equal to the transferor’s unused lifetime
limit, provided that the consideration does
not exceed the market value of the shares
transferred. This will ix the acquisition cost
of the person acquiring the shares.
INHERITANCE TAX MEASURES
The government will legislate to ensure
that the residence nil-rate band will also
be available when a person downsizes or
ceases to own a home on or after
8 July 2015 where assets are passed on
death to direct descendants.
Legislation will be introduced to ensure that
a charge to IHT will not arise when
a pension scheme member designates
funds for drawdown but does not draw
all the funds before death. This will be
backdated to apply to deaths on or after
6 April 2011.
9
| Captial Taxes
FOR
SALE