To further encourage this investment culture and access to capital for companies, it is proposed that entrepreneurs’ relief will be extended to external investors in unlisted trading companies. 

The new relief, being referred to as “investors’ relief”, will apply a 10% rate of capital gains tax to gains accruing on the disposal of qualifying ordinary shares held by individuals (other than employees and officers of the company issuing the shares).  To qualify for the relief the shares disposed of must: 

  • be newly issued to the person making the disposal on subscription for new consideration;
  • be in an unlisted trading company, or unlisted holding company of trading group;
  • have been issued by the company on or after 17 March 2016 and have been held for a period of three years from 6 April 2016; and
  • have been held continually for a period of three years before disposal.

Like entrepreneurs’ relief, the total amount of gains eligible for investors’ relief will be subject to a lifetime cap of £10 million per individual.  This lifetime allowance is stated to be separate from the £10 million current entrepreneurs’ allowance.

This is a welcome additional tax incentive that sits well alongside entrepreneurs’ relief, allowing investors who are not employed by the companies they invest in to pay capital gains tax at 10%.  

To ensure that this investors’ relief works to attract new capital into companies, there will be avoidance rules to ensure that shares must be subscribed for by individuals for genuine commercial purposes and not for tax avoidance purposes.

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