CG64135 - Entrepreneurs’ Relief: calculation of the relief: postponed or deferred gains

Where a gain arises and Entrepreneurs’ Relief is claimed it is possible that a claim may also be made under a provision which postpones or defers the CGT charged until the occurrence of a future event, such as EIS deferral relief under TCGA92/SCH5B In these circumstances the amount of the postponed or deferred gain is the gain after any Entrepreneurs’ Relief is given.

Where the postponement or deferral provision limits the gains attracting that relief to the lesser of the:

• chargeable gain arising upon the disposal of the ‘old asset’, or
• the consideration applied on the acquisition of the new asset,

then the chargeable gain applicable for the purpose of the first bullet, where a valid claim to Entrepreneurs’ Relief is made, is the ‘chargeable gain’ after the 4/9th Entrepreneurs’ Relief reduction has been made.

Example

N sells her business in 2009 and realises a gain of £99,000. This qualifies for Entrepreneurs’ Relief because it will constitute a ‘material disposal of business assets’. N claims the relief, but also makes an investment of £80,000 in qualifying EIS shares and claims to defer the gain.

N’s gain of £99,000 is reduced by 4/9ths, resulting in a chargeable gain of £55,000 – see CG64125. The investment in EIS shares exceeds £55,000, so the whole of the chargeable gain of £55,000 is deferred. This amount will come into charge at some later time under the normal EIS rules for charging deferred gains.