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If the unused basic rate is automatically deemed to be first used by the amount qualifying for Entreprenuers’ Relief (ER), then why does it not extend the £10 million lifetime limit of the Entrepreneur’s relief, which is a tax rate of 10%?
Your lecture touches on this topic, but it just says because it is first matched to the amount qualifying to ER, if that amount is greater than the unused basic rate amount, there is no unused basic rate amount to take account of…
I don’t get this, if you are using the unused basic rate amount to the amount qualifying for ER, then are you not using less of the lifetime limit of 10million, exactly less by the unused basic rate amount?? e.g if you had an unused basic rate amount of £11,500 you would be using £11,500 less of the lifetime limit of ER?
Any input to clarify this would be greatly appreciated sir.
thank you for your time.
Tax is not necessarily a matter of what any individual may think to be either logical or fair it is simply a set of rules that have been decided upon to be those that we must then apply.
The note from the study manual you quote:
“The gains qualifying for entrepreneurs’ relief must be taken into account when establishing which tax rate applies to other taxable gains in the tax year, in that they are deemed to firstly use any amount of
unused basic rate band.”says “The gains qualifying for ER ..” it is therefore ER that is being applied it is simply then that such gains remove the unused basic rate band from then being available to go against any other taxable gains.
It may not be the rule that you think is “fair” but it is the rule that we must apply.
so in essence, the unused basic rate band is considered as gains qualifying for ER. So if you had £9 million qualifying business assets for ER and then an unused basic rate band of £10,000, the actual qualifying amount for ER would be £9million + £10,000 (unused basic rate band). Such that unused rate band just uses the ER like any other qualifying business assets for ER?
-Thank you very much for your helpful reply.
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