Share this content

Dilution of Entrepreneur's Relief

Client owns shares in a limited company - 100% shareholder, also director.

5 years ago company built a property and received rental income.

1.5 years ago this property was sold and made a substantial gain (tax has been paid).

Company then used the net proceeds to fund a building project (with no intention to rent) which has been sold to a third party. Company is now building a third proeprty which is to be sold to a third party.

Up to the point when the first property was sold the company was an investement company, and then became a trading company when the building activities started.


If my client formally liquidates the company after selling the third property (and paying all the CT due on the trading activities), will he be entitled to full ER on the gain at liquidation? Or will there be a time apportionment between the period of being an investment company and being a trading company?

My reading of the legislation suggest that he will be entitled to ER in full but someone has suggested that I should check time apportionment.


Please login or register to join the discussion.

05th Dec 2012 17:23


Thanks (0)
06th Dec 2012 12:23

Taper relief

Under the old taper relief rules, a time apportionment would apply. There is no time appoitionment in the ER rules - you either get it or not. In this case, provided the company was trading for at least a year, ER can be claimed on any disposal, including a distribution following liquidation, within 3 years of cessation of trading.

Thanks (0)