CG63956 | Business Asset Disposal Relief: reduction in lifetime limit from 11 March 2020

Entrepreneurs’ relief was renamed in Finance Act 2020 with effect from 6 April 2020. The new name is generally used in this guidance but should be read as applying to times before that date.

As explained at CG63955, the lifetime limit for Business Asset Disposal Relief was reduced to £1 million from Budget day 11 March 2020.

The limit of £1 million applies to disposals on or after 11 March 2020 and takes into account any previous gains on which the relief has been claimed. So that if an individual had previously claimed the relief against £4 million of earlier gains then no further relief will be available.

The new limit applies to gains that accrue on a disposal from 11 March. This means that if a gain had been deferred from an earlier date under, for example, the EIS scheme then where the deferred gain comes back into charge on or after 11 March 2020 then the new limit will apply. The same will apply to gains deferred under Social Investment Tax Relief and gains deferred as a result of an election under TCGA/S169SD (dilution election).

Similarly, if there is a disposal of an entire business but some of the individual asset disposals take place before 11 March and some after, then the new limit will apply to the gains arising on any disposals that take place from that date.

This change applies where trustees jointly claim Business Asset Disposal Relief by reference to the lifetime limit of a qualifying beneficiary, see CG63985+.

There are no transitional rules.

The new lifetime limit will also apply where the anti-forestalling rules set out in paragraphs 3, 4 and 5 of Schedule 3 Finance Act 2020 apply. These rules apply where –

• An unconditional contract is entered into before 11 March 2020 and is completed on or after that date, see CG64172.

• A share reorganisation or exchange takes place from 6 April 2019 to 10 March 2020 and an election under TCGA1992/S169Q to disapply the “no disposal” rule in TCGA1992/S127 is made on or after 11 March 2020, see CG64173.

In remittance basis cases the lifetime limit that applies is the one in force when the qualifying disposal is made and not the limit when any proceeds are remitted.