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Investors’ Relief

Investors’ Relief

Investors’ Relief was introduced under the Finance Act 2016 for investors in unlisted trading companies who hold their shares for a minimum of 3 years. The government introduced the relief to help encourage a strong enterprise and investment culture.

This new Investors’ Relief will apply a 10% rate of Capital Gains Tax (CGT) to gains accruing on the disposal of ordinary shares in an unlisted trading company by individuals. Investors’ Relief can save each investor up to £1m in tax over the course of their lifetime, but there are certain criteria that need to be met to take advantage of this.

Taking Out Shares – How To Qualify

For you to qualify, your shares must have been purchased on or after 6th April 2016 or the shares must be issued and subscribed for on or after 17th March 2016.

There is no minimum or maximum number of shares you need to purchase to qualify for Investors’ Relief, unlike with Entrepreneurs’ Relief or EIS.

The shares you purchase must be newly-issued ordinary shares that entitle you to no preferential arrangements with the company and they need to be fully paid in cash. The shares cannot be listed on the Stock Exchange.

You must hold the shares directly and not via a personal services company.

HMRC will need to be convinced that you have made the investment for genuine reasons and not to avoid paying tax.

S4B advice – Investors’ Relief only applies to incorporated businesses so you will not qualify for investments made in limited liability partnerships.

How Long Do You Have To Hold On To The Shares To Qualify?

You have to hold onto your shares continuously for a minimum of three years from April 2016.

Under the scheme, the earliest tax year in which you can make a disposal that qualifies for Investors’ Relief is in the 2019/2020 tax year.

Can You Be An Employee Of The Company?

Yes, but only six months after you’ve taken out your shareholding as long as you are not a director of the issuing company.

You can become an unpaid director from the time of investment and still qualify for relief, although you can still claim:

• expenses incurred exclusively in the performance of your director’s duties
• interest on a loan granted to the company at a commercial rate
• dividend payments at no greater rate than would be considered a normal return on investment
• payment for supplying goods at a rate not higher than market value
• payment of rent on any property the company is occupying where the rent is reasonable and commercially justifiable
• payment for qualifying services relevant to its trade but not managerial or secretarial work normally associated with directors.

After Disposal Of Your Shares

Investors’ Relief is a completely separate relief from Capital Gains Tax Entrepreneurs’ Relief and EIS schemes. It is an up-to-£10m lifetime relief that you can take advantage of.

To claim the relief, you need to complete the capital gains tax pages on your Self Assessment Tax Return. You will be able to make a claim up to the first anniversary of the 31st January after the tax year you sell up.

Investors’ Relief – Talk to an Expert

As with the rules surrounding Capital Gains Tax Entrepreneurs’ Relief and EIS schemes, the Investors’ Relief scheme is complex and we’re here to help you navigate it. Speak to the S4B team today on 01628 623 444 or email us at

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