Entrepreneurs Relief Changes

Previously, in order to qualify for Entrepreneurs’ Relief, an individual must have held shares which represented five percent of the ordinary share capital which entitled them to five percent of the voting rights.

From 29 October 2018, the shares must also entitle the holder to five percent of the company’s distributable profits and five percent of the assets available to equity holders on a winding up.

The 2 key changes are:

• An extension of the qualifying holding period from one year to two years (introduced for disposals on or after 6 April 2019); and

• The claimant must have a five percent interest in both the distributable profits and the net assets of the company.

The extension of the qualifying holding period from one year to two years will mean that you need to consider your position at least two years in advance of any potential transaction to ensure the position is protected.