Finance Act 2015

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Chapter 6

Capital Gains Tax

Entrepreneur relief

35. The Principal Act is amended—

(a) in section 597A, by inserting the following after subsection (5):

“(6) Subject to section 597AA(5) —

(a) subsection (2) shall not apply where the subsequent disposal referred to in that subsection is made on or after 1 January 2016, and

(b) subsection (3) shall not apply where the second-mentioned subsequent disposal in that subsection is made on or after 1 January 2016.”,

and

(b) by inserting the following after section 597A:

“Revised entrepreneur relief

597AA. (1) (a) In this section—

‘51 per cent subsidiary’ has the same meaning as it has in section 9(1)(a);

‘development land’ has the same meaning as it has in section 648;

‘group’ means a holding company and all companies which are 51 per cent subsidiaries of the holding company;

‘holding company’ means a company whose business consists wholly or mainly of the holding of shares of all companies which are its 51 per cent subsidiaries;

‘qualifying business’ means a business other than—

(a) the holding of securities or other assets as investments,

(b) the holding of development land, or

(c) the development or letting of land;

‘qualifying group’ means a group, the business of each 51 per cent subsidiary (other than a holding company) in which consists wholly or mainly of the carrying on of a qualifying business;

‘qualifying person’ means an individual who is or has been a director or employee of a company (or companies in a qualifying group) who—

(a) is or was required to spend not less than 50 per cent of that individual’s working time in the service of that company (or those companies) in a managerial or technical capacity, and

(b) has served in that capacity for a continuous period of 3 years in the period of 5 years immediately prior to the disposal of the chargeable business assets of which the disposal of shares in the company (or one of those companies) forms the whole or part;

‘relevant company’ means a company (including a company in a qualifying group) the disposal of shares in which forms the whole or part of the disposal of chargeable business assets;

‘relevant individual’ means an individual who has been the beneficial owner of the chargeable business assets for a continuous period of not less than 3 years in the 5 years immediately prior to the disposal of those assets;

‘working time’ means any time that an employee or director is—

(a) at his or her place of work or, in the case of an employee, at his or her employer’s disposal, and

(b) carrying on or performing the activities or duties of his or her work.

(b) (i) For the purposes of the definition of ‘qualifying person’ in paragraph (a), any period during which the individual was a director or employee of—

(I) a company that was treated as being the same company, for the purposes of section 586, as a relevant company, or

(II) a company involved in a scheme of reconstruction or amalgamation under section 587 with a relevant company,

shall be taken into account in calculating the periods during which the individual was a director or employee.

(ii) For the purposes of the definition of ‘relevant individual’ in paragraph (a), any period during which the individual owned shares in—

(I) a company that was treated as being the same company, for the purposes of section 586, as a relevant company, or

(II) a company involved in a scheme of reconstruction or amalgamation under section 587 with a relevant company,

shall be taken into account in calculating the periods during which the individual was a beneficial owner.

(2) (a) Subject to paragraph (b), ‘chargeable business asset’ means an asset, including goodwill which—

(i) is, or is an interest in, an asset used for the purposes of a qualifying business carried on by an individual, or

(ii) is a holding of ordinary shares in—

(I) a company whose business consists wholly or mainly of carrying on a qualifying business, or

(II) a holding company of a qualifying group,

in respect of which an individual—

(A) owns not less than 5 per cent of the ordinary share capital, and

(B) is a qualifying person in respect of the company or, if the company is a member of a qualifying group, of one or more companies which are members of the qualifying group.

(b) ‘Chargeable business asset’ does not include—

(i) shares (other than shares mentioned in paragraph (a)(ii)), securities or other assets held as investments,

(ii) development land, or

(iii) assets on the disposal of which no gains accruing would be chargeable gains.

(3) Subject to subsection (4), the rate of capital gains tax chargeable on a chargeable gain or chargeable gains accruing in respect of a disposal or disposals of the whole or part of chargeable business assets made by a relevant individual shall be 20 per cent.

(4) (a) The rate of capital gains tax referred to in subsection (3) shall be chargeable only on so much, if any, of the chargeable gain or chargeable gains accruing, when added to the aggregate amount of any chargeable gain or chargeable gains accruing in respect of any previous disposal of the whole or part of chargeable business assets made by the relevant individual in the lifetime of that individual on or after 1 January 2016, that does not exceed €1,000,000.

(b) The rate of capital gains tax referred to in section 28(3) shall be chargeable on so much, if any, of the chargeable gain or chargeable gains accruing, when added to the aggregate amount of any chargeable gain or chargeable gains accruing in respect of any previous disposal of the whole or part of chargeable business assets made by the relevant individual in the lifetime of that individual on or after 1 January 2016, that exceeds €1,000,000.

(5) This section shall not apply, and section 597A shall apply, to a disposal of the whole or part of chargeable business assets made by a relevant individual where the amount of capital gains tax payable in respect of the disposal under this section is greater than the amount of capital gains tax payable in respect of the disposal were section 597A to apply.”.