Budget 2020 – Entrepreneurs Relief and International (SDLT surcharge and Property)

CGT: changes to entrepreneurs’ relief lifetime limit

The government has confirmed that the entrepreneurs’ relief (ER) lifetime limit is reduced from £10 million to £1 million, with effect for qualifying disposals made on or after 11 March 2020 and certain disposals made before 11 March 2020.

Legislation, which will be included in the Finance Bill 2020, will:

• Provide that the lifetime limit must take into account the value of ER claimed in respect of historical qualifying gains;
• Introduce provisions that apply to forestalling arrangements entered into before 11 March 2020 with the result that the new lower lifetime limit will apply to such arrangements unless the parties demonstrate (via a statement made by the transferor in a claim, which is stated in a technical note to be in addition to the normal ER claim) that they did not enter into the arrangements with the purpose of obtaining a tax advantage by reason of the timing rule in section 28 of CGTA 1992 and, where the parties are connected, that they entered into the arrangements for wholly commercial reasons.

In addition, where shares have been exchanged for those in another company on or after 6 April 2019 and before 11 March 2020 and an election is made under section 169Q of TCGA 1992 on or after 11 March 2020, the disposal will be treated as taking place at the time of the election for ER purposes (meaning that the new lifetime limit of £1 million will apply), if either of the following applies:

• Both companies are owned or controlled by substantially the same persons;
• Persons who held shares in the first company hold a greater percentage of shares in the second company than they did in the first company and, on 11 March 2020, the personal company test, the trading company and the employee/officer test are met in respect of the second company (section 169I(6), TCGA 1992).

 2% SDLT surcharge for non-UK resident buyers of English and Northern Irish residential property

A stamp duty land tax (SDLT) surcharge of 2% will be introduced for non-UK resident buyers of English and Northern Irish residential property with effect on and from 1 April 2021.

A refund of the surcharge will be due to buyers who become UK resident after their purchase.

Transitional measures will be introduced for contracts that have been exchanged before 11 March 2020 but are completed or are substantially performed after 1 April 2021.

The measures will be included in the Finance Bill 2021. The government will also publish a summary of responses to its consultation on the measure in due course.

For further questions in relation to tax-related issues in general or on the above article, please contact James Cohen directly on [email protected] or 0207 822 2257.

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