Introduced in the Finance Bill 2016, investors’ relief provides a capital gains tax (CGT) break for external investors subscribing for shares in unquoted companies. This relief allows gains to be taxed at just 10%, subject to a lifetime limit of £10 million.

Unlike entrepreneurs’ relief, investors’ relief does not require the investor to be a director or employee of the company, making it ideal for external investors. However, the company must meet certain qualifying criteria, and the shares must be held for at least three years.

Key Benefits of Investors’ Relief

The investors’ relief CGT break offers significant advantages to qualifying investors:

• Lower tax rate: Gains are taxed at 10%, much lower than the standard CGT rates of 20% or 28%.
• Lifetime limit: Investors can benefit from up to £10 million in qualifying gains.
• Additional allowance: This relief is entirely separate from the £10 million lifetime limit under entrepreneurs’ relief, offering greater tax-saving opportunities.

Investors should note that this relief only applies to shares subscribed for after 17 March 2016, and the company must remain compliant with qualifying conditions throughout the three-year holding period.

Investors’ Relief vs Entrepreneurs’ Relief

Entrepreneurs’ relief requires the investor to be a director or employee with at least 5% shareholding, while investors’ relief is designed specifically for external investors. This distinction makes investors’ relief CGT break an appealing option for those who prefer a hands-off investment approach.

How We Can Help

At Lewis Brownlee, we provide tailored advice on tax relief opportunities, including investors’ relief CGT break, ensuring you maximise your savings. Our experts can help you:

• Understand qualification criteria for investors’ relief.
• Structure investments to maximise tax benefits.
• Navigate compliance requirements.

We offer a free introductory meeting to discuss your tax planning needs. Help is at hand! Contact us today.

Final Thoughts

The investors’ relief CGT break provides an excellent opportunity for external investors to reduce capital gains tax liabilities. With proper planning, you can benefit from this generous tax relief while supporting qualifying businesses.

Here at Lewis Brownlee, we have experts in CGT poised to help. So, when you’re ready, we’re ready! Call us today on 01243 782 423 and lets see how we can help partner in your CGT success!

Farming profits can fluctuate significantly due to factors like weather, market conditions, and supply chain issues. To ease tax burdens, HMRC allows farmers to average their profits across multiple years. Previously, farmers’ averaging rules only permitted a two-year averaging period. However, changes from 2016/17 introduced a five-year option, providing more flexibility for managing taxable income.

Key Changes to Farmers’ Averaging from 2016/17

The Finance Bill 2016 introduced two major updates to farmers’ averaging rules:

• Five-year averaging – Farmers can now average profits over five years instead of just two.
• Removal of marginal relief – The previous system allowed some relief for those just over the threshold. This is no longer available.

A two-year averaging option remains available for those who prefer it.

Volatility Test Requirement

To use the five-year farmers’ averaging rules, businesses must pass a volatility test. This test ensures that profit fluctuations are significant enough to justify extended averaging.

If profits remain relatively stable, HMRC may not permit five-year averaging. Farmers should assess whether they meet the criteria before applying.

How We Can Help

Understanding farmers’ averaging rules can be complex, especially with the changes introduced in 2016/17. Our expert team at Lewis Brownlee can help you determine the best approach for your business.

If you need guidance on profit averaging and tax planning, contact us today. We’ll ensure you make the most of available tax reliefs.

Remember that if you borrow up to £10,000 there is no benefit in kind.

However the company has to pay 32.5% of the value of the loan to HMRC if the loan is still outstanding more than nine months after the year end. The company then has to wait until nine months after the end of the year in which the loan is repaid to get this back.

Bed and breakfasting the loan to get round this does not work unless there is more than 30 days before or after the repayment of the previous loan or the loan is £15,000 or less and you have borrowed the money for the repayment from outside the company such as from a relative or bank.