Road to corporate exit gets longer in 2019

Budget 2018

Budget 2018

If you were planning on pushing the exit button on your limited company, you should look at doing so before April 2019, after this date you may have a far larger tax liability to settle if you do not meet the qualifying condition for Entrepreneurs Relief post the amendments introduced in yesterdays budget.

Phil Hammond’s budget has introduced some changes which could see this sought after 10% tax rate becoming more elusive.

Minimum qualifying period extended from one to two years.

Legislation will be introduced in Finance Bill 2018-19 for disposal made on or after 6 April 2019, to increases this minimum period throughout which certain conditions must be met to be eligible for entrepreneurs relief from one year to two years. There are special provisions for cases where the business ceased before 29 October 2018.

The periods will increase from one year to two years for:

  • Disposal of whole or part of the business, by an individual who either owns the business directly or in partnership throughout the period of two years ending with the date of disposal.
  • Disposal of an asset where a claimant has disposed of an asset used at the time the business ceased, the business must have been carried on by the claimant for two years
  • Disposal of shares where a claimant has disposed of the shares in a company, the qualifying conditions in relation to companies must have been met for three years ending at the time of the disposal*
  • Disposal of an asset where a claimant has disposed of an asset used in a business after disposing of the business (a ‘disposal associated with a relevant material disposal’), that asset must have been used in the business for two years
  • Disposal of a trust business asset and the qualifying conditions in relation to trust business assets must have been met for two years.

Transitional rules will apply where the claimant’s business ceased before 29 October 2018, so that the old one year period will continue to apply to claims on disposals of assets within three years of cessation. The business will need to have been carried on for only one year prior to cessation.

Where the claimant’s personal company ceased to be a trading company (or the holding company of a trading group) before 29 October 2018 the old one year period will continue to apply to disposals of shares within three years of cessation. The company will need to have been a trading company (etc) for only one year prior to cessation.

The standout change here seems to be the three year minimum time limit for disposals of shares in companies, this is a threefold increase than previously legislated, and will significantly alter any exit planning for Shareholders.

Contact us to discuss your tax planing strategy.

Request a call-back

We love to hear from new clients, if you would like us to call you back, pop in your details, one of our qualified professionals will be in touch.

    Leave a Reply

    Your email address will not be published. Required fields are marked *

    London

    29th & 37th Floors
    One Canada Square,
    Canary Wharf, London E14 5AA
    Phone: 0207 099 1080

    Essex

    First Floor
    81-85 High Street,
    Brentwood, Essex CM14 4RR
    Phone: 01277 223 278

    Manchester

    Chancery Place
    50 Brown St
    Manchester M2 2JT
    Phone: 0161 820 1080

    Opening Times

    Monday – Saturday
    8:00 AM – 6:00 PM
    Sunday
    Closed