Investors Relief, effective for share acquisitions made on or after 6 April 2016, extends Entrepreneurs Relief for business investors. It reduces an investors’ capital gains tax liability from 20% to 10%.
Investors Relief is be available for unpaid directors and employees who acquire shares more than six months before taking up employment.
Long term investors in unquoted companies, or holding companies of trading groups, can obtain Investors Relief. If available, it reduces an investors’ capital gains tax liability from 20% to 10%. Investors Relief is subject to £10 million lifetime limit.
Investors Relief conditions
Investors who acquire new shares in the business can enjoy investors relief provided that the shares:
- Are ordinary shares which means that investors can’t have any preference arrangements with the business;
- Must be newly issued which means that transfers of shares from existing owners or incorporation shares will not qualify;
- Must be held by an individual which means that holding shares via personal services company will disqualify the sale;
- Have been held for three years starting from 6 April 2016;
- Are for a trading company, or a holding company of a trading group.
- Are not for tax avoidance, but genuine commercial purposes.
Use of Investors Relief
Unquoted companies can now raise additional funds outside the EIS, Enterprise Investment Scheme, and SEIS, Seed Enterprise Investment Scheme. Thus these companies can attract investors who have exceeded the EIS and SEIS limits. We advise you on the benefits of SEIS vs Investors’ Relief and how to Protect EIS investment.
We will continue to consider Entrepreneurs Relief in appropriate cases because for some the three year holding requirement of Investors Relief will be problematic.