What’s Entrepreneur’s Relief?
Entrepreneur’s Relief is a UK government created scheme open to directors who own 5% or more of a company, which which allows them to enjoy a 10% tax rate when they sell their shares, on gains up to a lifetime limit of £10m, saving them two thirds of the tax they would otherwise have to pay without the relief.
The government are effectively saying ‘we know you’ve paid corporation tax on the profits in the company thus far, thanks for that, we are going to give you a break now that you are retiring / leaving this business, we are going to allow you to keep more of your money’. It’s not one of those dodgy tax schemes we all read about! And unlike a lot of tax law, this one is pretty simple.
Want to know more about Entrepreneur’s Relief?
Here are a few links you might like to go to to find out more:
Gov.uk’s site giving guidance on eligibility
Institute of Chartered Accountants In England & Wales webinar
(A full hour’s webinar, more appropriate for accountants or tax advisers. Skip the first 3 and a half minutes’ introduction)
Gov.uk’s site giving guidance on how your accountant claims relief for you.
So how do you make use of this?
- First off, talk to your accountant / tax adviser. Their help will be needed, this is not something you will be able to do yourself. They will assess whether your circumstances fit the legislation and later on they will submit your self assessment form claiming the relief. Speak to your adviser before you sell the company/its business. And if you don’t have an an accountant/tax adviser who can help you, call us, we’ll recommend one.
- You and your tax adviser liaise with us – we will plan how and when to put your company into a solvent, members’ voluntary liquidation. The purpose of that liquidation is to distribute to you as shareholder what’s in the company whether it be cash or other assets (talk to us about the latter point, we have our own route for getting the cash / assets into your hands as shareholder very early indeed – not all liquidators do this).
- Your accountant claims for you the relief on your next self assessment tax return. You pay the 10% tax.
How much does it cost?
There’s no straight forward answer to this… it depends. It depends on your and the company’s circumstances. Ask for a fixed fee quotation – we are willing to work on a fixed fee basis, but will need to know what the role involves before we commit. Suffice to say we work with companies whose owners save tens, even hundreds of thousands of pounds, making the exercise worthwhile.