Calculating the gain

## Basic rule

For disposals on or after 23 June 2010, the mechanism for applying the relief changed. Instead of reducing the section 169N(1) gain by 4/9, the relievable gain is calculated in accordance with section 169N(1) and then the whole section 169N(1) gain is charged to capital gains tax at the specific entrepreneurs' relief capital gains tax rate of 10 per cent12. This is subject to a lifetime limit of £10m (taking into account any s 169N(1) gains charged at the entrepreneurs' rate of 10 per cent and any s 169N gains reduced by 4/9 under section as previously enacted) on disposals on or after 6 April 201113 (see C3.1301 for earlier limits).

The net figure arrived at under the above calculations (under the previous method, the section 169N(1) gain after the application of the 4/9 discount up to the available lifetime limit14, and under the current method the straight section 169N(1) gain) is treated as a chargeable gain accruing at the time of the disposal to the individual or trustees by whom the claim is made.

## Annual exempt amount

For disposals on or after 23 June 2010 the annual exempt amount may be utilised in the way most advantageous to the taxpayer. Where in the same year the taxpayer realises both gains which may be relieved by entrepreneurs' relief and gains not available for relief, the annual exempt amount may be set against the gain which is chargeable at the higher rate.

## The section 169N(1) gain

Where a claim is made in respect of a qualifying business disposal, the section 169N(1) gain is calculated: (i) by aggregating relevant gains; (ii) aggregating relevant losses; and (iii) subtracting (ii) from (i). “Relevant gains” means, in the case of a qualifying business disposal of shares in or securities of a company and/or of a interest therein, the gains accruing on the disposal, or in any other case the gains accruing on the disposal of any relevant business assets (see C3.1306) comprised in the qualifying business disposal. The gains are to be computed in accordance with the rules in TCGA 1992. In particular section 169N(6) supplies the assumption that notice of any loss for the purposes of TCGA 1992 s 16(2A) has been provided19. It is not necessary therefore to actually give HMRC notice of the relevant losses to make them allowable. “Relevant losses” means, in the case of a qualifying disposal of shares in or securities of a company and/or an interest therein, any losses accruing on the disposal, and in any other case any losses accruing on the disposal of any relevant business assets (see C3.1306) comprised in the qualifying business disposal. The losses are to be computed in accordance with the rules in TCGA 1992 and a notice must have been given under TCGA 1992 s 16(2A) to make them allowable.

## Interaction with earlier disposals

Earlier relevant qualifying business disposals are taken into account in determining whether a particular disposal exceeds the lifetime limit. “Earlier relevant qualifying business disposals” means, in the case of a qualifying business disposal by an individual, earlier qualifying business disposals made by him and earlier disposals of trust business assets in respect of which he is the qualifying beneficiary. In the case of a disposal of trust business assets in respect of which an individual is the qualifying beneficiary, it means earlier disposals of trust business assets in respect of which that individual is the qualifying beneficiary and earlier qualifying business disposals made by that individual Therefore, where there is a disposal of trust business assets, the gains in respect of which entrepreneurs' relief is claimed form part of the relevant qualifying beneficiary's lifetime limit.

## Individual and trust disposals on the same day

If, on the same day, there is both a disposal of trust business assets in respect of which an individual is the qualifying beneficiary, and a qualifying business disposal by the individual, the disposal of trust business assets is treated as taking place later. Therefore, if the qualifying beneficiary's lifetime limit, after taking account of any earlier relevant qualifying business disposals is not sufficient for entrepreneurs' relief to be available on the whole of the gains on the disposals taking place on the same day, the relief that is available is allocated to the qualifying beneficiary first, with only any balance remaining being available to the trustees.