Guidance

Investors' Relief 2023 (HS308)

Updated 6 April 2024

This helpsheet provides information to help you decide if you’re entitled to Investors’ Relief. It provides a guide to straightforward situations but doesn’t cover all cases. You can get help from your tax adviser. You can also consult the HM Revenue and Customs (HMRC) Capital Gains Tax Manual which contains sections (CG63500 to CG63644) that explain the rules in more detail.

What we mean by Investors’ Relief

Investors’ Relief reduces the amount of Capital Gains Tax (CGT) on a disposal of shares in a trading company that is not listed on a stock exchange. It applies to shares that are issued on or after 17 March 2016 that are disposed of on or after 6 April 2019, as long as the shares have been owned for at least three years up to the date of disposal. It is not usually available if you or someone connected with you is an employee of the company. Qualifying capital gains for each individual are subject to a lifetime limit of £10 million.

Who can claim relief?

Investors’ Relief is available to individuals and some trustees of settlements, but it’s not available to companies or in relation to a trust where the entire trust is a discretionary settlement. Personal Representatives of deceased persons can only claim if the disposal took place whilst the deceased person was alive. Please see ‘Qualifying conditions’ for more information on qualifying conditions for trustees of settlements.

Making a claim

Investors’ Relief must be claimed, either by the individual or, in the case of trustees of settlements, jointly by the trustees and the eligible beneficiary. You must make a claim to HMRC in writing by the first anniversary of the 31 January following the end of the tax year in which the qualifying disposal takes place. For a qualifying share disposal in the tax year 2022 to 2023 (ending on 5 April 2023) a claim for Investors’ Relief must therefore be made by 31 January 2025. A claim to Investors’ Relief may be amended or revoked within the time limit for making a claim.

Spouses or civil partners are separate individuals and may each make a claim. They’re each entitled to Investors’ Relief up to the maximum amount available for an individual (see ‘Individuals’), provided that they each satisfy the relevant conditions for relief (see ‘Shares that qualify for relief’).

How to claim

Individuals

If you can do so, you should claim Investors’ Relief in your 2022 to 2023 tax return. If you can’t make your claim in your 2022 to 2023 tax return, then a claim may be made to HMRC in writing providing the information listed below.

Trustees of a settlement

A claim by the trustees of a settlement must be made jointly with the eligible beneficiary for a trustees’ disposal. Joint claims may be made to HMRC in writing providing the information listed below.

Information to be provided in a claim.

When submitting a claim in writing the claimant(s) should provide the following details,

• name
• address with postcode
• HMRC office
• tax reference of the claimants
• signature of the claimants
• total of all previous chargeable gains on which they have claimed Investment Relief,
• a statement confirming that the claim is made under s169VM TCGA 1992 in respect of the shares specified and that the claim is correctly stated to the best of the claimant’s belief
• a description of the share or shares disposed of
• the date(s) of the disposals
• the name and addresses of all income beneficiaries interested in the settlement share or shares disposed of
• what is each qualifying beneficiary’s income entitlement in percentage terms of the share or shares disposed of

A copy of computation of the capital gain on which Investors Relief is being claimed and the amount due should be submitted with the claim.

Amount of relief

If you’re entitled to Investors’ Relief, qualifying gains (see below) up to the lifetime limit applying at the time you make your disposal, will be charged to CGT at the rate of 10%.

If the qualifying gains together with all previous gains on which Investors’ Relief has been claimed, exceed the lifetime limit applying at the time you make your disposal, the whole of the excess will be taxable at the normal rate of CGT at the time your gains accrue.

Individuals

Shares that qualify for relief

To qualify for Investors’ Relief, you have to have subscribed for shares that meet the relevant qualifying conditions throughout the period you have owned them and that you have owned for at least 3 years. The main conditions that must be met are:

• they are ordinary shares in the company
• you subscribed for them in cash, and they were fully paid up when issued
• the company is a trading company or the holding company of a trading group
• none of the company’s shares are listed on a stock exchange
• neither you nor any person connected with you is an employee of the company or of a company connected with it

Ordinary shares are all shares apart from those that entitle the holder to a fixed rate of dividend but no other right to the profits of the company.

A trading company is one that does not have any substantial activities apart from trading, see CG64055.

Not all shares that are traded on a stock exchange are treated as being listed. You can find out whether shares are listed at https://www.gov.uk/government/publications/designated-recognised-stock-exchanges-section-1005-income-tax-act-2007.

If you become an unpaid director of a company you invest in then you may still be able to claim Investors’ Relief, see CG63550.

Shares may cease to be treated as qualifying shares if value is received from the company. See CG63640 for further detail.

When not all of your shares qualify

If you own a number of the same type of shares in a company, then that is treated as a single asset for CGT purposes. But it is possible for your holding to contain more than one type of share for Investors’ Relief purposes:

1. Excluded shares that cannot meet the conditions. This may be because, for example, they were issued to you before 17 March 2016, or you did not originally subscribe for them directly from the company.
2. Potentially qualifying shares that meet all the conditions apart from not yet having been owned for three years.
3. Qualifying shares that meet all the conditions for relief.

Where there is such a mixture of shares then you work out the gain on the shares in the normal way (see HS284 Shares and Capital Gains Tax) but only the proportion of the gain that relates to the qualifying shares will qualify for Investors’ Relief.

You will need to make additional adjustments where you have made part disposals out of a holding of shares that are not all qualifying shares, see CG63570.

Trustees of settlements

The disposals on which trustees of settlements can claim relief

Investors’ Relief may be available to trustees of settlements who dispose of shares by reference to the £10m lifetime allowance of a beneficiary that has had an interest in possession in the settled property that included those shares for at least three years up to the time of their disposal. The beneficiary must not be an employee of the company and must elect to be treated as an eligible beneficiary.

If there are any other beneficiaries of the trust who have interests in possession, only part of the gain will qualify for relief. That part is the proportion which a beneficiary’s interest in the income of the trust (or the part of the trust which includes the property disposed of) bears to the interests in that income of all the other beneficiaries with interests in the trust (or the relevant part of the trust) at the date the qualifying period ends. Where there are more than one eligible beneficiary, their interests in the income are aggregated to calculate how much relief is due.

Claims by trustees must be made jointly with the eligible beneficiary and will reduce the lifetime allowance of the eligible beneficiary.

Maximum relief

The maximum qualifying net gains which may benefit from Investors’ Relief is restricted to a lifetime limit from all qualifying disposals. It’s not an annual limit.

Investors’ Relief may be claimed on more than one qualifying disposal as long as the lifetime limit of qualifying gains, applicable at the time you make the disposal, isn’t exceeded. Therefore, because you may be entitled to relief on more than one occasion, it’s important that you keep a record of the gains against which you may have previously made a claim.

Qualifying gains exceeding the lifetime limit

If your qualifying net gains exceed the lifetime limit applicable to the time you make that disposal, no further relief is due and the excess over that amount is wholly chargeable at the CGT rate of 10% or 20%.

Spouses and civil partners, and joint holdings

Spouses and civil partners are treated separately for Investors’ Relief. Each person is entitled to relief up to the maximum lifetime limit of qualifying gains, provided the relevant conditions are satisfied.

Where you hold shares jointly with another person, whether that is your spouse, civil partner or someone else, you are treated as having subscribed for the appropriate proportion of qualifying shares.

Reorganisations and exchanges

Under the CGT rules, if shares in one company are exchanged for shares in another company the original shares may, subject to certain conditions, be treated as equivalent to the new holding of shares. Where this treatment applies the exchange doesn’t count as a disposal of the original shares. Any gain up to the date of exchange will be taxable only when the new holding of shares is disposed of, see Helpsheet 285 Share reorganisations, company takeovers and Capital Gains Tax.

New shares issued to you in an exchange will be treated as being shares you subscribed for the purposes of Investors’ Relief and may still qualify even if they are in a listed company. However, it is possible that they will not meet one or more of the other conditions. For example: they may not be in a trading company or you may be an existing employee of the company. Also, the exchange rules apply where loan notes, rather than shares, are issued to you and these cannot qualify for Investors’ Relief. To stop Investors’ Relief being lost on an exchange you may elect that the normal rules about exchanges don’t apply. You will then be treated as disposing of the shares in your personal company at the time of the exchange and Investors’ Relief may then be claimed against any gain arising on that disposal. The election must cover all of the shares, you can’t elect for only part of the shares to be treated in this way.

You must make this election in writing to HMRC by the first anniversary of the 31 January following the end of the tax year in which the qualifying disposal takes place. So for the tax year 2022 to 2023 (ending on 5 April 2023), you must make an election by 31 January 2025. You can consult the HMRC Capital Gains Tax Manual which contains a specific section (CG63630) that explains this in more detail.

Filling in the Capital Gains Tax summary pages

The Capital Gains Tax summary notes explain how to include chargeable gains where there has been a claim to Investors’ Relief.

Contact

For advice and further information about online forms, phone numbers and addresses see Self Assessment: general enquiries.