Budget 2015: Entrepreneurs’ relief tightened, Corporation tax and more bad news for banks

Wednesday, March 18, 2015

The government has announced that legislation will be introduced to prevent entrepreneurs’ relief applying to certain disposals of shareholdings, where the holding structure for the shares is considered to have been contrived for the purpose of obtaining the relief. The new measures are designed to capture arrangements such as those where an individual may have held a small direct stake in a trading company, but may have arranged a higher effective percentage shareholding through a joint venture structure. The new measures will affect any disposals of shareholdings on or after 18 March 2015.

New legislation will also be introduced to prevent entrepreneurs’ relief being claimed in the disposal of personal assets used in company or partnership business under the “associated disposal” rules, unless there is also a contemporaneous disposal of at least a 5% share in that company or partnership business. There has previously been no minimum requirement to the size of withdrawal from the business. The new measures will affect disposals of assets on or after 18 March 2015.

The new measures relating to entrepreneurs’ relief are introduced alongside those introduced in the Autumn Statement preventing a claim for entrepreneurs’ relief on goodwill arising on incorporation and a subsequent corporation tax deduction for the goodwill in the company for transfers of business on or after 3 December 2014.

Entrepreneurs may need to review their plans to ensure they do not inadvertently fall foul of the new provisions.

Corporation tax: loss refresh prevention

The government has announced new measures to prevent the utilisation of brought forward corporation tax losses where the entitlement for utilisation has only arisen due to an artificial or contrived arrangement.

The new measure will be effective from 18 March 2015, and will also catch existing arrangements already in place, to the extent that the arrangement generates taxable profits on or after 18 March 2015. For companies with an accounting period straddling 18 March 2015, taxable profits will be allocated into notional periods before and after that date, with the new rules applying to the notional period commencing on 18 March 2015, based on a time or otherwise just and reasonable basis.

Yet again, it is understandable that the government wishes to introduce targeted anti-avoidance rules to clamp down on perceived abuse in this area.

Further bad news for banks

Further to the announcement in the Autumn Statement regarding the restriction for banking companies of the use of tax losses incurred up to 31 March 2015, the government has announced that the Bank Levy will be increased from 0.156% to 0.21% from 1 April 2015. The government is also intending to consult on the introduction of measures to make banks’ customer compensation expenses non-deductible for corporation tax purposes.

The banking sector continues to be the target of a government in need of funds to reduce the deficit – their logic being they helped the sector on the way into the recent recession and it is the banks’ duty to help the country on the way out.

Contact us

For more information contact Tina Riches

Tina Richies, Smith & Williamson's National Tax Partner

Tina Riches

National Tax Partner

T: 020 7131 4252
email Tina


By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.

The tax treatment depends on the individual circumstances of each client and may be subject to change in future.

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