Entrepreneurs’ tax relief will be extended to long term investors in unlisted companies, chancellor George Osborne has confirmed in his Budget.
Under the new rules, entrepreneurs will be able to access a 10% rate of capital gains tax on newly issued shares in unlisted companies purchased on or after 17 March 2016, provided they are held for a minimum of three years from 6 April 2016.
These will be subject to a separate lifetime limit of £10 million of gains.
The government will also allow entrepreneur's relief to be claimed on the disposal of privately held-business assets to a family member, and will allow more relief in joint ventures and partnerships where the existing 5% minimum holding conditions are not satisfied.
The Budget documents said: 'This Budget continues to lower taxes, with new support for small business and entrepreneurs, while also modernising the tax system and taking steps to ensure that taxes are fair and are paid.'
The extension of the relief will be revenue neutral for the Treasury in 2016-17. It will bring in £5 million in 2017-18, but will then cost the exchequer £25 million the following year, £40 million the following year and £60 million.
Entrepreneurs’ relief applies to business owners looking to sell their business, qualifying for a preferential tax rate of 10% on business gains of up to £10 million. In last years’ Budget, the government set its sights on the relief as part of an effort to tackle tax avoidance, announcing that it would close loopholes to make sure entrepreneurs' relief is only available for those selling businesses and stop employment intermediaries from exploiting the tax system.
The cost of entrepreneurs’ relief was around £500 million in 2008/09, rising to an estimated £2.9 billion by 2013/14.