UK Budget 2016: Property investors treated to more tax relief

London’s property start-ups could find it easier to attract investment and ease the capital’s housing crisis after changes to Entrepreneurs’ Relief, revealed in yesterday’s Budget.

Under new rules, external investors, regardless of the size of their holding, in unlisted trading companies, will be able to benefit from a 10% tax rate on profits up to £10 million if they sell their shares after a three-year period.

Previously external investors needed to be 5% shareholders and become directors to qualify for the tax break.

Until now, external investors would have faced the full rate of capital gains tax unless they could make their investment under the Enterprise Investment Scheme. Only companies with a qualifying trade could attract EIS money.

The move is a fillip for companies which develop and sell commercial or residential property, which have never been accepted as a qualifying trade for EIS.

Cormac Marum, of Harwood Hutton, said: “This is a good move by the Government and ought to encourage small-scale local property developments by entrepreneurs. It should encourage the construction of the type of low-cost housing London desperately needs.”

The extension to Entrepreneurs’ Relief is a boost to AIM, which is classified as “unlisted” for tax purposes and therefore eligible. The junior stock market is suffering as volatile markets and fewer listings have impacted trade.