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KinsellaTax considers the Entrepreneurs’ Relief

By March 7, 2017June 29th, 2017No Comments

We are right in the middle of an argument with HMRC over Entrepreneurs’ Relief.

It is well known that Entrepreneurs’ Relief applies to a Capital Gain made from the sale or transfer of a business. The tax rate is reduced from your usual maximum of 18% to just 10%.

So, there we are – it’s well worthwhile taking it if it’s possible.

One of the main conditions, and the one that we are fighting at the moment, is that the shares must have been owned by the individual claiming Entrepreneurs’ Relief for at least 12 months ending on the date of the sale. That is the procedure we are going through at the present time.

Our client is a chartered accountant and he sold his shares according to HMRC within the 12 month period, therefore they have not allowed him to claim Entrepreneurs’ Relief. We believe that we have extenuating circumstances that should apply, thus giving our client entitlement to the Entrepreneurs’ Relief.

We all know that Entrepreneurs’ Relief is something that one has to look into very carefully. We read an interesting article recently which laid out certain points with regards to Entrepreneurs’ Relief.

Let’s call this gentleman Mr A who in 2013 bought 10% of the shares, already holding previously 10% of the shares which he bought in 2010. He then bought another 10% in July 2014 and 10% in 2015. In September 2015 he was offered the chance to sell all his shares which he agreed to do and the contract was eventually signed in May 2016.

Now the shares bought in July 2015 fell outside the 12 month period but he was covered because the Entrepreneurs’ Relief rule says that providing you have held 5% of the ordinary shares for at least 12 months prior to the sale then all shares, regardless of when they were bought, qualify for Entrepreneurs’ Relief.

Of course, one of the ways you can ensure you fall within the 12 month period is delay selling your shares until you reach that. But it’s very useful to know that in fact all shares, whatever time they were purchased, provided you hold 5% of the ordinary shares for at least 12 months before selling them qualify for Entrepreneurs’ Relief.

I will let you know how we get on with our own case, which is very interesting, but will probably end up before the FTT which inevitably will cause delays.

Take care.

Until next time…