For a budget that was pretty boring, there was a fair amount in it about capital gains tax. Given I had clients expecting increases in capital gains tax on budget day and were even planning to accelerate transactions to take place ahead of them then they would have been surprised to see the main rates of capital gains tax falling with effect from 6 April 2016 and with the new rate for higher rate taxpayers and additional rate taxpayers of 20% – an 8% reduction. The basic rate falls from 18% to 10% although the old rates will continue to apply to residential property and carried interest.

It means there is an ever greater incentive to retain money within businesses and to invest for the future and the increases in dividend tax rates with a reduction in corporation tax should encourage retention of profits within businesses and investing for the longer term.

Alongside this, a new relief is being introduced for investors in unquoted companies which is being badged as an extension to entrepreneurs’ relief. This is going to add to complexity in terms of it is a measure designed to benefit share issues on or after 17 March 2016 and so is designed to motivate external investors to invest in unquoted companies. This new relief has a £10million lifetime cap. It is not clear whether this is a new lifetime cap to the entrepreneurs’ relief lifetime cap or part and parcel of the same thing. This will be relevant to individuals who already utilise their £10m lifetime limit for entrepreneurs’ relief and creates quite a confusing landscape as far as shareholders’ structuring for corporate business is concerned.

The first choice will inevitably be to encourage subscribers to make use of the enterprise investment scheme (EIS) but not all trades will qualify for the EIS. If EIS is not available then this new investors’ relief will be attractive although it may be that entrepreneurs’ relief could also apply which would potentially be more generous depending on the nature of the investment. Over time people may vary between the different categories but there is still the need to consider things such as employment related securities as well. If this sounds a bit of a minefield then it almost certainly is.

At the same time, the employees shareholder exemption may be starting to look a little too generous as a restriction is being introduced to limit that relief to a lifetime limit of £100,000. That relief is being used as an alternative to enterprise management incentives (EMI) by some companies and the lifetime limit being introduced here needs to be looked at in that context.

Despite concerns that there would be restrictions to entrepreneurs’ relief in the budget, no new restrictions have been introduced which may be because George Osborne does not want to aggravate the party faithful. On the Finance Act 2015 changes where restrictions were introduced to entrepreneurs’ relief as far as associated disposals were concerned then, after several suggestions that these would be unwound and it would be pretended that they never happened, this has finally been included in this budget and changes will be made effective from 18 March 2015 – budget day last year. Hopefully this year’s tax measures have been better thought through, but you never know.

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