Investors’ Relief: A Valuable CGT Break for External Investors

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!