Monthly Tax Idea – November 2011 - Mazars - United Kingdom
Monthly Tax Idea – November 2011
Entrepreneurs’ relief – when £10 million is just not enough.
Typically entitlement to capital gains tax entrepreneurs’ relief allows individuals selling their business to pay tax at 10% when otherwise the rate of tax would have been 28%. That this relief is capped at the first £10 million of qualifying lifetime gains is obviously only a concern for the highly gifted (or lucky) few.
The good news for the few is that with advance planning and a business in a company, it may be possible to shelter gains from the higher rates of capital gains tax well above the £10m individual lifetime limit. This is because, correctly structured, a claim can be made of entrepreneurs’ relief based on other people’s lifetime limits of £10 million each.
Apart from the Midas touch, the planning options require suitable relations or friends who are not going to need their personal entitlement to entrepreneurs’ relief for any other purpose. As with most entrepreneurs’ relief planning, it normally needs to be implemented well in advance of the sale.
In practice a successful entrepreneur might use the idea to shelter new operations from the higher rates of capital gains tax, once sitting on a large potential gain from his or her previous ventures.
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