In an otherwise uneventful Spring Statement in relation to tax changes, the Government have proposed a change to Entrepreneurs' Relief that may help some innovators to secure the relief.
The change is concerned with the not uncommon position where an entrepreneur wishes to expand their business by raising additional funds through an issue of shares. Currently, if the share issue dilutes their own shareholding to below 5%, entrepreneurs' relief would not be available when they sell their shares.
The proposal would allow entrepreneur's to bank their relief before dilution happens and defer paying any tax until the shares are sold.
The proposed changes are to be welcomed as a practical approach to removing this barrier to growth. It is proposed that the changes would apply from April 2019.
Chancellor Philip Hammond emphasised his desire to encourage an innovative business environment in his Spring Statement, which included the launch of a consultation on changes to entrepreneurs’ relief (ER) designed to ensure that it does not discourage entrepreneurs from seeking external finance for their companies