Basically, own a business asset for more than 2 years, and any capital gain tax on the sale could be as little as 10% of the gain. This is a massive tax saving, eg. £100,000 profit, (75% taper relief) £25,000 chargeable @ 40% = £10,000 tax = 10% of the £100,000 gain This is a massive tax saving.

A business asset for Capital Gains Tax (CGT) purposes is :-

1. Shares and securities owned by an individual in a qualifying company.

2. An asset used by a qualifying business, individual, partnership or limited company for its trade.

3. An asset held for the purposes of a qualifying office or employment to which the owner was required to devote the majority of their time.

4. An asset used for the purposes of a trade carried out by an individual on their own or in partnership.

A qualifying company up to 5 April 2000 was a trading company or a holding company of a trading group (ie. not an investment company), in which an individual was a full-time officer / employee and owned 5% of the voting rights (where an individual was not a full-time officer / employee, they needed to own 25% of the voting rights).

This rule was changed from 6 April 2000 to include all shares in unquoted trading companies, all AIM shares (unless controlled by a quoted company), and all shares in a quoted company which the individual is employed by. Where the individual is employed by a non-trading company, and has less than a 10% interest, these shares are also business assets. If they are not employed by the quoted company, but still own 5% or more of the voting rights, these shares become business assets.

When shares were not eligible under the old rules but now are, a time apportionment needs to be done.

A trading company exists to carry on a trade, rather than to hold investments. Any investments over 20% of the balance sheet and the Inland Revenue will argue that the company is an investment company.

For more information, please contact us.