The swing from entrepreneurs’ relief towards capital allowances

The question of whether owners of commercial property should charge rent to connected tenant companies has always hinged on weighing up entrepreneurs’ relief against capital allowances.

It is not usually possible to claim entrepreneurs’ relief on a property that is let. Indeed many owners have opted not to charge rent in the past so they can continue to take advantage of this relief which has usually been the more generous of the two.

However accountants will need to rethink this strategy in light of changes announced by chancellor Rishi Sunak in the 2020 spring Budget.

Let’s start with the basic principles to set the scene.

Entrepreneurs’ relief reduces the amount of capital gains tax due on the disposal of qualifying business assets and is available only to individuals. Taxpayers have a lifetime limit which since the relief’s introduction in 2008 had risen ...