Individual Investors

Individual Investors´tax benefits

Business assets

  • Business assets include shares or securities in
    qualifying unquoted trading companies. For this
    purpose shares on AIM and PLUS are considered to be
    unquoted and can therefore
    qualify for business taper relief.
  • The company must be a trading company or the
    holding company of a trading group. Insubstantial
    non-trading activities may be undertaken. The
    non-trading activities should be insubstantial –
    broadly no more than 20 per cent.
  • A trading group comprises the company and its
    51 per cent or more subsidiaries, plus certain
    joint venture investments.
  • Business assets also include investments of at
    least 5 per cent or all holdings by employees
    and directors in shares or securities in a quoted
    trading company.
  • Shares held by directors and
    employees in any quoted or unquoted non-
    trading company also qualify as business assets
    if the individual holds not more than 10 per cent
    (including shares held by connected persons).

Non-business assets
Non-business assets include shares or securities in quoted companies (unless held by an employee) and non-qualifying unquoted companies.

Mixed assets
‘Mixed’ assets are those which were business assets for only part of the qualifying holding period. This may arise due to a change in legislation or a change in the status of the company (eg ceasing to be a trading company, or becoming quoted by, for example, moving to the Official List), or a change in the circumstances of the individual. For such assets, taper relief is calculated by first apportioning the gain between business and non-business periods. Each part of the gain attracts taper relief at the appropriate rate for the whole of the qualifying holding period.

Relationship with deferral reliefs
Where deferral relief is claimed on reinvestment under the EIS, taper relief on the deferred gain is frozen and that gain is not tapered further over the period of ownership of the EIS investment.

CGT gift relief
There is no general CGT relief for gifts (although transfers between husband and wife are on a no gain no loss basis). However, if shares or securities in an AIM and PLUS trading company are transferred, other than at arm’s length, the deemed capital gain arising can be ‘held over’, ie the CGT liability is postponed until a subsequent arm’s length disposal by the transferee, who effectively inherits the transferor’s base cost.
The relief must be claimed by both the transferor and transferee within five years and ten months of the end of the relevant tax year.

Who can benefit from taper relief?
• Taper relief is applicable to individuals and trustees, whether resident in the UK or not, on gains assessed to UK CGT.
? The relief is particularly useful for the transfer
or gift of shares within families.
? The transferee must be resident or ordinarily
resident in the UK and remain so for six years.
? There are no specific requirements for the
transferor.
There is no minimum or maximum holding required.
• It does not apply to a gift of shares to a
company.
Note: The effect of a gift is that the period of ownership for taper relief purposes starts again (except for transfer between husband and wife) and there is no taper relief for the previous period of ownership.