Muras Matters: Investors’ Relief


Business Asset Disposal Relief (BADR), formerly Entrepreneurs’ Relief, is an often utilised capital gains tax (CGT) relief enabling investors to pay the lower rate of 10% tax, subject to a lifetime limit of £1 million, on gains from the disposal of shares in their business. However, Investors’ Relief is a similar CGT relief which is often overlooked, and has a much larger lifetime limit of £10 million.

Investor’s relief was first introduced during the 2016 Budget but only became available for individuals to claim from 6 April 2019. Whilst Investors’ Relief is similar to BADR in applying a 10% rate of CGT in certain circumstances there are some important distinctions between the two reliefs. The main difference being that investors’ relief is not usually available if an individual, or someone connected to them, is an employee of the company.


Investors’ Relief reduces the amount of CGT on a disposal of shares in a trading company to 10%. The relief is available to individuals and some trustees of settlements, but it is not available to companies or in relation to a trust where the entire trust is a discretionary settlement. Personal Representatives of deceased persons can only claim the relief if the disposal took place whilst the deceased person was alive.

Capital gains qualifying for relief are subject to a lifetime limit of £10 million per individual. If the qualifying gains together with all previous gains on which Investors’ Relief has been claimed, exceed the lifetime limit applying at the time of the disposal then the whole of the excess will be taxable at the normal rate of CGT applicable at the time the gain arises.

The main conditions for Investors’ Relief to apply are as follows:

  1. The shares must be ordinary shares in an unquoted trading company or the holding company of a trading group.   
  1. The investor or their spouse or civil partner must have subscribed for the shares in cash which were fully paid up when issued (note that purchasing the shares from another shareholder is not sufficient).
  1. The investor cannot be an officer or employee of the company, nor can anyone connected with them (this is the opposite to BADR).
  1. The investor or their associate cannot receive any value over £1,000 from the company for the 4 year period starting 1 year before the shares were issued.

 An important point to note is that shares listed on the Alternative Investment Market (AIM) are treated as unquoted for this relief, unless the company has a second listing elsewhere.

 ‘Connected person’ has a very broad definition. It includes spouse, relative (brother, sister, ancestor or descendant), spouses of a relative and your spouse’s relatives.

If shares eligible for investors’ relief are disposed of at a loss, the loss is an allowable loss (because any gain would have been chargeable, albeit eligible for a reduced rate of capital gains).

Except in very unusual circumstances it is unlikely that both investors’ relief and business asset disposal relief will be available in relation to the same holding of shares.

The above represents only a general outline of Investors’ Relief and the associated qualifying conditions. If you require any more information on any of the points raised above or have any questions on Investors’ Relief please contact our Tax Director, Jenny Marks.

To see our other news items please visit our Muras Baker Jones – Blog.