Remove the anomalies from Entrepreneurs’ Relief

It would be impossible to remove all of the anomalies from Entrepreneurs’ Relief (ER). Nevertheless the government should at least consider extending ER to all employee shareholders. While that is unlikely, at the very minimum Enterprise Management Incentive scheme employee shareholders should have ER extended to them. The present 5% minimum shareholding requirement for employees and office holders is not consistent with the rule that allows any partner to claim ER regardless of their level of engagement in the business.

As they stand, the ER rules penalise sole traders who sell assets in anticipation of cessation of business. That is an anomaly that needs to be removed by allowing a claim for ER by a sole trader on disposals without replacement of business assets made within a permitted time before cessation, say within three years where the disposal is made as part of the trader’s withdrawal from the business.

Will the Chancellor leave IHT business and agricultural reliefs alone?

Reliefs from IHT of 50% or 100% apply to business and agricultural property including cases where the owner is not actively involved in any business activity. For example landlords of agricultural tenanted property and non-active shareholders in unquoted trading companies get 100% relief, as do owners of commercial woodlands. Inheritance tax is not a massive contributor to the public coffers, especially in the present time of fallen values, but the Treasury and Chancellor may judge that now would be an appropriate time to remove what they may perceive as an anomaly.