The 2018 budget contained two changes to shareholdings to Entrepreneurs Relief (ER) introduced in the 2018 Budget. The first change increases the holding period for shares held by individual shareholders. Individuals will now need to hold the shares for at least 24 months rather than the current 12 months before they can claim ER on the disposal of shares.
This change will apply to disposals made on or after 6 April 2019. Individuals who have held their shares for more than one year but less than two at the date of disposal would pay a higher rate of CGT.
The second change immediately introduced further tests that must be satisfied before ER is available. This means that along with the existing requirement that an individual holds 5% of the ordinary share capital and votes of the company, the individual must also be ‘beneficially entitled to’ either 5% of profits (dividends), and assets available for distribution to equity holders on a winding up of the company, or 5% of the sale proceeds had the whole of the ordinary share capital of the company been sold on the day of the disposal.