A survey of 1,700 taxpayers by IFF research questioned a randomly selected group of 1,700 taxpayers to gauge their views on the tax relief on behalf of HMRC.

Of these, 39% had claimed entrepreneurs’ relief within the last five years; 35% had paid CGT at the full rate in the same period because they had not claimed entrepreneurs’ relief; and 28% had neither paid CGT nor claimed entrepreneurs’ relief, but held assets that mean they are likely to be eligible to claim the relief in the future.

Of claimants, 73% were aware of entrepreneurs’ relief at the point at which they sold/closed the business or asset.

Awareness was much lower at the point of initial investment (16%), though some respondents may have invested before entrepreneurs’ relief was introduced.

One in four claimants cited uncertainty around eligibility as the most common barrier to entrepreneurs’ relief claims, but three quarters (75%) said it was straightforward.

The main reasons for selling the assets was to release funds for personal use (39%), retirement funding (33%), reinvestment through release of assets (29%) and a company sale (27%).

A fifth (21%) took action for tax planning purposes, although only 2% cited this as their sole reason for disposing of their assets.

Those most likely to consider using entrepreneurs’ relief at the point of initial investment were those who no longer had involvement in the company, but were intending to set up a new company and had been receiving professional advice.

HMRC said this suggests that entrepreneurs’ relief is influencing some people to invest who later look to re-invest in new entrepreneurial activities.

A fifth (22%) reported that entrepreneurs’ relief influenced their decision in some way, either at the point of investment (5%) or at disposal (13%). The main reason for using the tax break was tax efficiency, particularly for those with assets worth over £1m.

Among individuals who had not paid CGT or claimed entrepreneurs’ relief in the last five years but had assets that could be eligible, 16% said it would influence their business decisions (whether to close/sell the business or invest in new ones) in the future.

IFF Research conducted 1,700 telephone interviews across three groups of taxpayers drawn randomly from those who had completed a self-assessment tax return for the tax years ending in 2011 to 2015.

HMRC research, Capital Gains Tax Entrepreneurs’ Relief: Behaviours and Motivations

Report by Pat Sweet