HMRC publishes guidance on investors’ relief

HMRC has updated its Capital Gains Manual to include guidance on investors’ relief, which can be found at CG63500P.

 

The relief was introduced in Finance Act 2016 to allow certain gains to be taxed at 10% and is available for individuals and trustees disposing of shares. Similar to entrepreneurs’ relief, there is a cap of £10m to the amount of gains that can benefit from the reduced rate of capital gains tax. To qualify for the relief a number of conditions must be met including:

 

  • the individual subscribes for shares which are issued on or after 17 March 2016;
  • the shares are ordinary shares;
  • the issuing company is a trading company or holding company of a trading group;
  • the shares are not listed on a recognised stock exchange;
  • the individual is not a relevant employee (see below); and
  • the shares are held continuously for three years from the date of issue or from 6 April 2016 where the shares are issued between 17 March and 5 April 2016.

 

Some of the conditions must be met for the entire shareholding period and so it is important for individuals to be aware of the conditions from the outset – and to keep their advisers informed.

 

Relevant employee

Relief will be denied if an investor (or a person connected to them) is a relevant employee at any time from the date the shares are acquired to the date of disposal. A relevant employee is a person who has been an officer or employee of the issuing company or a company connected with it. There are some exceptions to the rule, for instance, in respect of unpaid directors.

 

To make a claim for the relief

Claims need to be made on or before the first anniversary of 31 January following the tax year in which the disposal is made.

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