Tax Relief for Property Investors: Everything you need to know

Lucy Mangan - Menzies Accountant

Lucy Mangan – Partner

In the March 2016 budget a new tax relief was announced which may not yet be widely utilised. You could be missing out!

See our quick questions and answers below.

Q – What is this relief?

A – Investors’ Relief

Q – What is the benefit of property investors tax relief?

A – A 10% tax charge.

The property investors tax relief provides for:

  • A 10% tax charge on capital gains arising from the sale of certain shares.
  • Lifetime limit of £10 million of qualifying gains.
  • Limit is in addition to £10 million lifetime limit available under Entrepreneurs’ Relief (ER).

Q – I assume there are requirements to be met?

A – Of course!

There are requirements in respect of the shares, the company and the investor. Find out more with our help sheet.

Q – How is it different to Entrepreneurs’ Relief?

A – There are a number of key differences including:

  • This ONLY applies to shares issued after 17th March 2016.
  • The investors CANNOT be an employee or connected to an employee (however they can be an unremunerated Director).
  • There is NO VOTING RIGHTS requirement.
  • There is NO MINIMUM shareholding.
  • The shares MUST be held for 3 years.
  • The company MUST be a trading company throughout the ownership period.

Q – Can it apply to the property sector?

A – Yes

The company must be a trading company or holding company of trading group but Property developers or property traders are NOT excluding activities.

How could this help the property sector?

Increase external investors looking for a tax advantage?

Unlike some other tax advantaged schemes, e.g. EIS/SEIS, where property developers and traders are excluded activities Investors Relief could attract external investors looking for a good return in a tax efficient way.

Attract minority unconnected investors?

Unlike Entrepreneurs’ Relief it is not necessary to hold a minimum shareholder, have voting rights or be an employee. Investors’ Relief could therefore attract minority investors without you giving up any control.

Maxed out on Entrepreneurs’ Relief (ER) already?

The £10 million limit for qualifying gains is available ON TOP of the £10 million under ER. If you’ve maxed out on ER already it may be possible to access Investors’ Relief for future gains. Structuring of any investment is key so seek advice to ensure you don’t miss out.

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Posted in Blog, Property & construction