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is entrepreneurs relief available in conjunction with an ESC C16 liquidation and is it available where client maybe deceased

Client has terminal cancer and one of the options that he is keen on is to liquidate the company that he is 50% shareholder of such that funds are realised and then distributed but using ESC C16.

I know this may not be the most sensible option in terms of inheritence tax but its what he wants so on that basis. I wondered whether entrepreneurs relief is available in conjunction with using ESC C16 and in addition, given the potentially short timescales, are there any issues in terms of my client becoming deceased whereby such a claim would no longer be available? 

Assuming the ESC C16 route is taken, what is the effective date of a distribution for capital gains tax purposes ?

many thanks 



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14th Sep 2010 16:07

ER irrelevant on death

Hi Dave

Sorry to hear about your client's predicament.

The date of disposal for CGT when ESC C16 is applied is the actual date of distribution (and there can be more than one disposal if there is more than one distribution). For ER, assuming that the shares qualify in the first instance, your client's health is irrelevant. Ditto ESC C16 (and the two are not linked - ESC C16 capital treatment isn't affected by the availability of ER). If he dies before the distribution, ER won't be an issue surely because the shares will be revalued and uplifted in value at death (but may not attract BPR, depending on the circumstances).



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15th Sep 2010 09:49

Couple of questions

What is the position regarding the other 50% shareholders. Are they able to continue to run the company after his death.

Secondly is there a particular reason why your client wants to realise the funds from the company before his death and potentially create a captial gains tax and inheritance tax liability. Perhaps you need to quantify the figures to show your client how much tax he/his family are going to suffer as a result of his plans as it does seem a waste as the only one that will win is the tax man.

If he needs the money would a company buyback be possible to allow the company to continue to trade whilst releasing the funds for your client.

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