Landlords excluded from CGT entrepreneurs’ relief

Permalink: Landlords excluded from CGT entrepreneurs’ relief
by Gill Montia

Financial website, This is Money, is alerting buy-to-let landlords to changes in capital gains tax (CGT) being introduced from 6th April 2008.

The Government plans to simplify the CGT system by introducing a single flat rate of 18%.

This will see the end of the taper relief system that reduces the rate of tax depending on how long an asset had been held.

Whilst it will benefit landlords making early disposals, it could have the effect of increasing the minimum rate on capital gain for those selling a property held for longer than ten years, from 10%, to 18%.

Following a campaign by business pressure groups, the Government has now introduced “entrepreneur’s relief” which will be applied to the sale of certain businesses.

A 10% rate of tax will be payable, up to a lifetime limit of £1 million, after which tax will revert to 18%.

While full details of the relief have yet to be released, indications are that investors in residential property will not be classed as entrepreneurs, and will therefore not be eligible for the 10% rate.

Information given on the HMRC website explicitly excludes property letting, saying: “The relief will apply to gains arising on disposals of the whole or part of a trading business (including professions and vocations, but not including a property letting business other than furnished holiday lettings) that is carried on by the individual, either alone or in partnership.”

Large landlords running their operations as a full-time registered business may possibly benefit from the relief but tax experts agree that this is unlikely.