CG63600 - Investors’ Relief: reduction the lifetime cap from 30 October 2024: anti-forestalling rules
Throughout this manual, all legislative references are to Taxation of Chargeable Gains Act 1992 (“TCGA92”) unless otherwise stated.
The amount of gains that can be charged at the Investors’ Relief rate is limited to the “lifetime cap”. From 30 October 2024, the lifetime cap was reduced from £10 million to £1 million. Further information relating to the lifetime cap can be found at CG63500.
The provisions provide a number of “anti-forestalling” rules to counter certain arrangements that sought to lock in entitlement to the higher limit in anticipation of the changes to the relief.
CG10249 gives an overview of the anti-forestalling rules applying to the various changes to Capital Gains Tax announced at Budget 2024. CG10250 provides further detail on the rule applying to unconditional contracts and CG10251 to that applying to elections to disapply the share reorganisation rules.
Unconditional contracts
See CG10250 for an explanation of this rule which applies to the reduction in the Investors’ Relief lifetime cap as well as the change in main CGT rates from 30 October 2024. It is extended to apply to the changes in the IR rates from 6 April 2025 and 6 April 2016, see CG63515 for guidance on that aspect.
Where the rule applies then the reduced lifetime cap of £1 million applies.
Example
David owns shares in ABC Ltd that are standing at a considerable gain and would qualify Investors’ Relief. He has no immediate intention of selling the shares but in August 2024 he became concerned that the lifetime cap would be reduced. He was advised the set up a separate company, XYZ Ltd, and enter into an agreement to sell his shares to that company for their market value at the time the contract is completed.
If the lifetime cap does not change, then contract will remain uncompleted and may be cancelled. However, if the lifetime cap does change then he hopes to obtain the relief attracting the higher lifetime cap. This would be achieved when a third party approaches David to buy his shares in ABC Ltd. At this point, David would complete the contract with XYZ Ltd and the third party will then buy the shares for XYZ Ltd. The rule in section 28 means that the disposal to XYZ Ltd is treated as taking place in August 2024, before the lifetime cap was reduced.
The anti-forestalling rules mean that where an unconditional contract is entered into before 30 October 2024 and is completed after that date then, for the purposes of determining the appliable lifetime cap only, the disposal will be treated as taking place at the date of completion and not the date of the contract. This includes conditional contracts where conditions were satisfied before 30 October 2024.
Consequently, David’s disposal to XYZ Ltd will be caught by the anti-forestalling rules such that the post-30 October 2024 lower lifetime cap applies.
Elections under section 169VT
See CG10251 for a general explanation of this rule. An election can be made under section 169VT that displaces the normal rule in section 127 that a share reorganisation is treated as not involving any disposal of the original shares involved in the reorganisation. Here, reorganisation incudes share exchange that are treated as reorganisations by sections 135 and 136.
The way that this rule applies for Investors’ Relief is fairly simple – it will apply where the individual concerned still held shares that either were either qualifying or potentially qualifying shares for the relief at the time the lifetime cap was reduced at Budget 2024: 30 October 2024. If they did, then the lifetime cap of £1 million applies if they make a section 169VT election on or after that date.
Example
Fiona has a shareholding made up of 250 ordinary A shares in in 456 Ltd. Her shares are qualifying shares for the purposes of Investors’ Relief, she has just not held them for long enough for them to qualify. Before 30 October 2024, 456 Ltd was acquired by 789 Ltd and she received an issue of shares in that company in exchange. Her new shares are treated as the same as her original ones and so still qualify for Investors’ Relief, see CG63630.
In May 2026 Fiona sold her shares for £5 million but later that month elects under section 169VT to trigger a gain at the time of the exchange of £4 million, based on their value at that time. In the absence of the anti-forestalling rules, there would be a gain of £4 million that would qualify for relief under the pre-30 October 2024 lifetime cap, chargeable at the 10% rate and one of £1 million chargeable at the main CGT rate.
However, the anti-forestalling rule means the £4 million gains accruing to Fiona because of her post-30 October 2024 election will be treated as arising on the date of her election for the purposes of the lifetime cap. This means that only £1 million of Fiona’s gains are chargeable at the Investors’ Relief rate. Also, the increased rate of 18% for qualifying gains from 6 April 2026 will apply, see CG63515 for guidance on how the anti-forestalling rule applies to the rate change.