Investors’ relief (IR) can only apply to capital gains made from the sale of shares which have been owned for at least three years since 6 April 2016. This means the tax break could not be used until 6 April 2019 or later. Even then qualifying conditions must be met.
IR is equivalent to entrepreneurs’ relief (ER) but is for individuals (companies can’t claim it) who put their money into a company without being involved in running or working for it, and don’t need to own a minimum of 5%.
The IR tax break, like that for ER, is that capital gains to which it applies are only taxable at 10%.
To qualify for IR you must have:
Subscribed for ordinary shares, i.e. the company must have issued them to you rather than you having bought, or been given them, by someone else.
The shares need be in an unlisted company.
You must have acquired them on or after 17 March 2016.
At the time you make the gain from selling or transferring the shares you must have owned them continuously for at least three years since 6 April 2016.
To qualify for IR you must:
Not be an employee or officer of the company, i.e. director or company secretary, when you make the gain from selling or transferring the shares.
Not be or have been “connected” with anyone who is or has been an employee or director of the company while you’ve owned the shares. A connected person is your spouse, a direct lineal descendant, e.g. your grandson, or a sibling. If your cousin or nephew is an employee or director of the company, that’s OK. However, if you’re in a business partnership with a director or employee you’re connected to them and you can’t claim IR.
The connected person condition doesn’t block IR if you aren’t paid by the company at the time of sale, and before you owned the shares you weren’t employed in the company’s business or that of a connected company, e.g. a company in same group.