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Author: JP / / Latest News

Do you have enough Shares to Qualify for CGT Entrepreneurs Relief?

Entrepreneur’s Relief reduces the rate of CGT to 10% on the first £10 million of gains on the disposal of qualifying business assets. This would include sole traders disposing of their business and partners disposing of their interest in a partnership carrying on a business. With many businesses operating as limited companies these days it is important to appreciate that not all shareholdings qualify for this generous relief.

Shareholdings qualify for Entrepreneur’s Relief provided the company is a trading company or the holding company of a trading group. There are additional conditions that the shareholder is an officer or employee of the company and holds 5% or more of the company’s ordinary share capital and votes. All of these conditions must be satisfied throughout the 12 months up to the date of disposal.

A couple of recent tax tribunal cases have considered the 5% test and the HMRC view is that most shares expect for certain preference shares need to be considered. Please contact us first if you are considering issuing additional shares in your company as it may a detrimental effect on other shareholders’ entitlement to CGT Entrepreneur’s Relief.

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