CIOT calls for greater scrutiny of plans for Entrepreneurs’ Relief

6 Jun 2020

A concerned CIOT is calling for greater scrutiny and debate about the Government’s plans to curb Entrepreneurs’ Relief (to be re-badged ‘business asset disposal relief’), ahead of the committee stage of the Finance Bill on Thursday (June 4). The media was full of comments from friends and enemies of Entrepreneurs’ Relief in the weeks leading to March’s Budget but there was no formal public consultation, to the disappointment of the CIOT.

The Budget 2020 announcement reduced the lifetime limit for gains qualifying for Entrepreneurs’ Relief from £10 million to £1 million for qualifying disposals made on or after 11 March 2020. The Government claims it is in response to evidence that Entrepreneurs’ Relief has primarily benefited a small number of very affluent taxpayers and done little to generate additional entrepreneurial activity.

The CIOT would like to see a broader public consultation about the objectives and efficacy of Entrepreneurs’ Relief to examine the economic rationale and coherence of other aspects beyond the lifetime cap, such as the five per cent ownership condition (where the sale is of a company), the two-year ownership requirement, and more widely the overall policy intent and whether alternative means of meeting it are more appropriate.

John Cullinane, CIOT Tax Policy Director, said:

“We hope that MPs will look closely at the Government’s plans for Entrepreneurs’ Relief. This could usefully include asking why the Government’s review of the relief was not carried out in public. It is disappointing that such a significant change to an established relief risks going through the policy process with little independent examination and debate.

“The lifetime limit has increased a few times since Entrepreneurs’ Relief was introduced in 2008 when the original limit was set at £1 million. These have been ‘surprise’ Budget announcements and there is no ‘roadmap’ to provide a background idea of the Government’s thinking or the likely direction of travel.

“A difficulty for taxpayers who have legitimately taken advantage of reliefs is uncertainty about when the rules for a particular relief might change. There are people affected by the March 2020 Budget change who have reinvested money in the expectation of a relief that they will no longer receive. Without transitional provisions such ‘retroactive’ effects are inevitable in a capital gains tax system where there is deferral advantage in that gains are taxed only when realised rather than as accrued. A transparent process of evaluation, conducted as an open consultation or public call for evidence, would have allowed taxpayers greater indication of the direction of travel as a background to their investment decisions and reasonable expectations in the lead up to the Budget.”

The Government’s ‘Tax Consultation Framework’ commits to five stages of policy development and implementation of tax policy. A stage involves reviewing and evaluating the change recognising that monitoring and evaluating tax policy is critical to maintaining the efficacy and productiveness of the tax system. The 2017 Better Budgets report – produced by CIOT in partnership with the Institute for Government and the Institute for Fiscal Studies – called on the Government to institutionalise evaluation of tax measures – that is provide for systematic post-legislative review of whether measures are achieving their objectives at an acceptable cost, with Parliament holding government to account.


1. Entrepreneurs’ Relief is a relief from capital gains tax. Entrepreneurs’ Relief is available to individuals and some trustees.

2. The Finance Bill reduces the lifetime limit for gains qualifying for Entrepreneurs’ Relief from £10 million to £1 million for qualifying disposals made on or after 11 March 2020.

Dates of disposal and lifetime caps: 6 April 2008–5 April 2010 - £1,000,000; 6 April 2010–22 June 2010 - £2,000,000; 23 June 2010–5 April 2011 - £5,000,000; 6 April 2011 – 11 March 2020 - £10,000,000; From 11 March 2020 - £1,000,000

With effect from tax year 2020-21 onwards, the relief is to be renamed business asset disposal relief.