Tax Tip Week 25 – Entrepreneur’s Relief on cessation or transfer of your business
For Professional Contractors and Freelancers who are closing or transferring shares from a company with a retained value in assets; careful consideration of the route to take could save you money in Capital Gains Tax.
The Capital Gains Tax (CGT) rate for 2009-2010 is 18% chargeable after your personal allowance of £10,100.
However, if you qualify for Entrepreneur's relief you can achieve a net tax effective rate of 10%.
That's a saving of £6,182 on assets valued at £100,000 on cessation or transfer of your business.
An individual may claim Entrepreneur's relief more than once up to a ceiling lifetime allowance of £1,000,000. Any excess claims above this limit, CGT will be charged at 18% (2009-2010).
Where there is a spouse owning shares within the company, let's say for example 50% / 50% shareholding; EACH individual is eligible to the lifetime allowance of £1,000,000, although conditions do apply.
Please see our guidance Entrepreneur's Relief on cessation or transfer of your business in our Knowledgebase.