Budget 2015: Entrepreneurs’ relief – new restrictions for associated disposals

The rules on associated disposals allow for ER on the disposal of assets used in a business but owned privately by a participator (shareholder or partner), providing those assets are disposed of as part of a ‘withdrawal’ from the business. There is currently no minimum interest which must be disposed of to constitute a withdrawal and this has resulted in uncertainty as to whether a meaningful withdrawal has been made.

With effect for disposals made on or after 18 March 2015, in order to be eligible for ER on an associated disposal, the participator must dispose of a minimum 5% of the shares held in the company or a minimum 5% stake in the assets of the partnership carrying on the trade.

The announcement of a 5% de-minimis reduction in interest will provide certainty to clients wishing to claim ER on associated disposals.