Victoria House, 116 Colmore Row,
Birmingham B3 3BD
enquiries@pettfranklin.com
0121 348 7878

Budget 2020: Entrepreneurs' Relief

24 March 2020

With all the attention on Coronavirus and the devastating impact on many businesses, there is less focus on what now seems like minutiae from the Chancellor’s budget on 11th March.

One area which will impact on employee share schemes is the restriction on Entrepreneurs’ Relief.

This is now being renamed as Business Asset Disposal Relief. It is not clear why the name is being changed, although it might be thought to make a subsequent abolition of the relief entirely easier to present politically.

In addition, HMRC have now provided additional guidance on the substantive changes. These are reflected in the following paper from HMRC: ER Restrictions. This confirms that the lifetime limit for ER is to be reduced from £10m to £1m with anti-forestalling provisions which have the effect of applying the new rules to any disposal entered into before 11th March which have not been completed.

It remains to be seen what effect these changes will have on the design and operation of employee share schemes. Our initial comments are:

(i) The substantial reduction in the value of ER is likely to mean that structuring share rights to obtain the relief will be a less significant factor than has previously been the case.

(ii) This will result in companies and participants being less inclined to seek to operate Growth Share plans with complex share rights and more likely to consider joint share ownership plans and more inclined to seek to adopt joint share ownership plans (or JSOPs).

(iii) The availability of ER will continue to be an incentive for companies to adopt Enterprise Management Incentives (EMI).

Pett, Franklin & Co. LLP are experts in employee share schemesexecutive incentives and share valuation. To find out more about how we can help you or your client, please contact William Franklin.

« Back to News


Pett, Franklin & Co. LLP is a limited liability partnership registered in England & Wales (registered number: OC354096) and an alternative business structure ("ABS") authorised and regulated by the Solicitors Regulation Authority (No. 534342).

The word 'partner', used in relation to this LLP, refers to a member of the LLP. A list of the members of this LLP is displayed at the registered office of the LLP: Victoria House, 116 Colmore Row, Birmingham B3 3BD.

No contract can be concluded with Pett, Franklin & Co. LLP nor service effected by email.

(C) Copyright 2017 Pett Franklin & Co. LLP. All rights reserved.

The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. The law may have changed since this page was first published. Readers should not act on the basis of the information included and should take appropriate professional advice upon their own particular circumstances.