Tax payers looking for higher returns on their investments are being encouraged to explore a lesser known form of tax relief.
Jess Swift, Tax Client Manager, says Investors’ Relief was a largely overlooked but hugely valuable benefit that could be increasingly attractive with interest rates at record lows.
“The Spring Budget introduced some drastic overnight changes to Business Asset Disposal Relief which was formerly known as Entrepreneur’s Relief, but the criteria for Investors’ Relief remained unchanged.
“Where it is available, this relief reduces the rate of Capital Gains Tax from 20% to 10% on up to £10 million of lifetime gains.
“And now, given the low interest rates, investors may be prepared to take greater risks in order to potentially achieve higher returns, and Investors’ Relief could play an important role in the decision-making process.”
Jess says the aim of Investors’ Relief was as an incentive to attract investment in unlisted trading companies.
“This means it’s not generally available to employees and directors, but it may be available to directors who do not take a salary.”
“The shares must be ordinary shares subscribed for in cash on or after March 17, 2016, and there is a minimum holding period of three years before the relief becomes available. There is also no 5% minimum holding and there are no excluded activities.”
Jess says the April 5, 2020, self-assessment tax returns would be the first returns in which claims for Investors’ Relief could be made as the three-year minimum holding period was only met on April 6, 2019.
“The legislation surrounding Investors’ Relief and Business Asset Disposal Relief is extremely complex and investors should seek specialist advice before making any decisions to make sure they meet all the qualifying criteria.”