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Use of Trusts to Cash-in Retirement Relief |
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Prior to 5th April 1999, shareholders aged 50 or over in small family companies knew that when they eventually sold their shareholding, and retired from the business, retirement relief would either remove or lessen the tax cost of this exit route. |
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To coincide with the introduction of Taper Relief, Retirement Relief is being withdrawn as follows: |
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Tax
Year
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100%
relief on gains up to:
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50%
relief on gains between:
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1998-99
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250,000
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250,001
- 1,000,000
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1999-00
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200,000
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200,001
- 800,000
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2000-01
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150,000
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150,001
- 600,000
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2001-02
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100,000
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100,001
- 400,000
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2002-03 |
50,000
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50,001
- 200,000
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| For shareholders who are already eligible to claim retirement relief, on age or health grounds, it may still be worth transferring these shares into a trust, to cash in on this relief whilst it still exists. When the shareholding is eventually sold to a third party, the trust will have a higher base cost, which will reduce or extinquish its final capital gain. | ||
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Such tax planning is particularly attractive to certain individuals. Care needs to be exercised to ensure that holding the shares personally, instead of via a trust, is not more tax efficient, taking into account taper relief. |
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