This tax relief could allow you to pay only 10% CGT on gains you make on shares held in trading companies. The conditions you need to meet for this relief have changed significantly in recent months.
The shares must be issued directly to you on or after 17 March 2016 and you must hold them continuously for at least three years. When the shares are issued the company mustn’t be quoted on a recognised stock exchange, but it can become ‘quoted’ later.
You can’t take advantage of investors’ relief if you are already employed by the company, but you can become an employee of the company six months or more after you subscribe for the shares. You must not be offered employment with the company when you subscribe for your shares.
You are permitted to become an unpaid director of the company and hence influence the running of the company. You can be paid reasonable expenses which are directly related to the costs you incur a director, but you mustn’t be paid a salary for that role.
There are strict rules to prevent you extracting value from the company other than as rent or interest paid on a commercial basis.
The conditions which you and the company need to meet to qualify for investors’ relief are very complex. Our capital tax experts can guide you through them step by step.