Entrepreneur’s relief – associated disposals

Entrepreneur’s relief – associated disposals

by | 10 Mar, 2017 | Business, Tax

Entrepreneur’s relief – associated disposals

Entrepreneurs’ Relief: Associated Disposals Explained

Entrepreneurs’ Relief, now known as Business Asset Disposal Relief, offers a reduced Capital Gains Tax rate of 10% on qualifying business disposals. A key aspect is the treatment of associated disposals, such as when a business owner sells assets like trading premises held personally but used by their company. To qualify, specific conditions must be met.

Shareholding Requirements for Associated Disposals

For an associated disposal to qualify for Entrepreneurs’ Relief, the individual must dispose of at least 5% of their shareholding in the company. This means that if you own 100% of the company, selling 5% of your shares alongside the asset disposal would suffice. However, in cases where ownership is shared, calculations become more complex.

Example:

  • If you own 60% and your spouse owns 40% of the company, disposing of 5% of the total shares equates to 8.3% of your personal shareholding. Therefore, you would need to sell 8.3% of your shares to meet the requirement.

It’s crucial to ensure that the disposal aligns with these shareholding thresholds to qualify for the relief.

Beware of Anti-Avoidance Rules

When planning associated disposals, be mindful of anti-avoidance provisions designed to prevent exploitation of Entrepreneurs’ Relief. Transactions that appear artificial or primarily tax-motivated may attract scrutiny from HM Revenue and Customs (HMRC). Engaging in genuine commercial activities and maintaining thorough documentation can help mitigate this risk.

How We Can Help

Navigating the complexities of Entrepreneurs’ Relief and associated disposals requires careful planning. At Lewis Brownlee, we offer expert guidance to ensure your transactions comply with HMRC regulations and maximise available reliefs. For personalised advice, please contact us.

Understanding the intricacies of Entrepreneurs’ Relief associated disposals is essential for effective tax planning. By meeting the necessary conditions and being aware of potential pitfalls, you can optimise your tax position during business asset disposals.

tanding the Residence Nil Rate Band for Downsizers

tanding the Residence Nil Rate Band for Downsizers

by | 2 Mar, 2017 | Property, Tax

tanding the Residence Nil Rate Band for Downsizers

Understanding the Residence Nil Rate Band for Downsizers

The Residence Nil Rate Band (RNRB) allows individuals to pass on an additional amount of their estate tax-free when leaving their main residence to direct descendants. As of the 2025/26 tax year, the RNRB is £175,000. This means that, combined with the standard nil rate band of £325,000, up to £500,000 can be passed on free of Inheritance Tax. For married couples or civil partners, this can total £1 million.

Downsizing and the RNRB

Even if you no longer own a residence at the time of your death, you can still benefit from RNRB. This applies if you’ve downsized to a less valuable home or sold your property after 8 July 2015. To qualify, the following conditions must be met:

  • The original property would have qualified for the RNRB if retained until death.
  • Assets of equivalent value are left to direct descendants, such as children or grandchildren.

For example, if you sold your home to move into residential care, your estate could still claim the RNRB, provided your will is appropriately structured. However, if you have no direct descendants, the RNRB may not apply.

Calculating the Downsizing Addition

The downsizing addition is calculated based on the value of the residence sold and the value of assets left to direct descendants. The aim is to ensure that individuals who downsize or sell their home are not disadvantaged regarding the RNRB. Detailed guidance on this calculation is available on the HMRC website.

How We Can Help

Navigating the complexities of Inheritance Tax and the Residence Nil Rate Band can be challenging. At Lewis Brownlee, we offer expert advice to ensure your estate planning is tax-efficient and aligns with current legislation. For personalised guidance, please contact us.

Understanding the Residence Nil Rate Band for Downsizers is crucial for effective estate planning. By ensuring your will is correctly structured and assets are appropriately allocated, you can maximise the tax-free benefits available to your estate.

Residence nil band for inheritance tax purposes

Residence nil band for inheritance tax purposes

by | 1 Mar, 2017 | Tax

Residence nil band for inheritance tax purposes

If an estate is valued at more than £2,000,000 the additional residence nil band which comes in for deaths after 5 April 2017 is reduced by £1 for every £2 over.

So potentially savings of up to £350,000 x 40% = £140,000 could be lost once the estate’s value has surpassed the maximum even if there is a transferable residence nil band.

However, failed PETs do not count towards the estate’s value; so making lifetime gifts to bring an estate below or closer to £2,000,000 could result in a significant saving of inheritance tax – even if done as part of some death bed planning.

Capital gains on assets bought and sold in a foreign currency

Capital gains on assets bought and sold in a foreign currency

by | 24 Feb, 2017 | Tax

Capital gains on assets bought and sold in a foreign currency

A reminder that while the pound trades at poor rates of exchange against both the dollar and the euro, it is possible to make a capital gain for UK tax purposes even if there is no gain or even a loss in the foreign currency.

For example, asset bought in on 31 March 2015 for €100,000 when the euro exchange rate was €1.38 = £1, would have a sterling cost of £72,464. If sold on 31 December 2016 for €100,000 the sterling equivalent would be £85,470 using an exchange rate of €1.17 = £1.

So no gain in local currency but a capital gain in the UK of £85,470 – £72,464 = £13,006.

Car and van fuel benefit rates

Car and van fuel benefit rates

by | 23 Feb, 2017 | Business, Tax

Car and van fuel benefit rates

If fuel is provided for private use in a company van or company car and it is not reimbursed a fuel benefit charge arises. From 6 April 2017 the car fuel benefit increases to £22,600 and the van fuel benefit to £610.

The taxable benefit is a percentage of this car fuel charge, which is determined from the CO2 emissions of the vehicle. You need to be doing an awful lot of private miles in a company car to make the fuel benefit worthwhile having as a taxable benefit in kind!

Tax relief for employees’ expenses incurred in employment

Tax relief for employees’ expenses incurred in employment

by | 16 Feb, 2017 | Tax

Tax relief for employees’ expenses incurred in employment

As an employee your may be able to claim tax relief if you have to use your own money to pay for travel or things you must use for your own job, if your employer will not or does not.

Examples are:-

  • Repairing or replacing small tools
  • Cleaning, repairing or replacing specialist clothing such as safety boots or uniform
  • Business mileage (where you use your own car – 45p per mile (25p per mile for excess over 10,000 in a tax year)
  • Fuel costs (where you use a company car but fuel not provided)
  • Travel and overnight expenses
  • Professional fees and subscriptions paid to some approved professional organisations

The claim can be made using form P87 – tax relief for expenses from employment. You can do this yourself or we can help you.