The Chancellor announced that Capital Gains Tax (CGT) relief for disposals of qualifying shares into Employee Ownership Trusts (EOTs) was too generous. Effective from Budget Day all qualifying disposals into EOTs will benefit from 50% relief on gains with the remaining 50% chargeable to CGT in the tax year of transfer to the EOT.
It is not clear at this stage whether Business Asset Disposal Relief (BADR), which is currently at 14% in 2025/26 rising to 18% in 2026/27, will apply to the 50% of gains chargeable to CGT.
In other measures, non-UK resident individuals who hold an interest in UK land and property through Protected Cell Companies (PCC) may be impacted by changes in the way the test for property rich companies is applied. A property-rich company is one where 75% of its gross asset value derives from UK residential property.
In a PCC each individual cell’s assets and liabilities are segregated from those of other cells, but the property richness test is currently applied to the PCC as a whole. Under the proposals each cell within the PCC will be analysed, so individual cells may be classified as property-rich even if the PCC overall is not.
Finally, in relation to incorporation of businesses i.e. where unincorporated businesses transfer their assets to a limited company structure, from 6 April 2026 the transferor will be required to make a claim on their Tax Return for the tax year of transfer for the deferral of CGT to apply. Under current rules, incorporation relief applies automatically i.e. there is no need to make a claim where the taxpayer meets the conditions. The relief operates by deferring the capital gain that would normally arise from the transfer of business assets.
At the same time it will no longer be possible for a transferor to make an election to disapply the relief, typically in circumstances where incorporation resulted in a personal claim for BADR to apply.