Entrepreneurs Relief

Entrepreneurs Relief

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Client owns 90% of the shares in a trading company which he is going to sell. He is a full time director and this 90% qualifies for entrepreneurs relief.

He has a key employee who owns the other 10%. The employee doesn't want to sell his 10% to the potential new owner but will sell to his boss who owns the 90%. The reason for this is that there is deferred consideration which the employee isn't happy about and his boss wants to give him his 10% upfront to get the deal done.

The way the deal has been propsed is that the boss buys the 10% for exactly the amount he will then sell them for, (£100k). The next day the Boss sells the full 100% for £1m. My worry is that the 10% won't qualify for entrepreneurs releif as the 10% has only been held for one day.

Thoughts.............

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By bernard michael bayly
24th Mar 2011 10:24

Entrepreneurs relief

Surely if he buys the shares for £100k and sells them for £100k there is no profit Why would he need entrepreneurs relief on the 10% or have I missed something

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By blok
24th Mar 2011 10:46

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As Bernard says there will be no gain on the 10%.  Technically if there was a gain then the 10% would qualify, they would be merged with the existing 90% and ER would be available.

If there was any "funny stuff" going on you would be open to transaction in securities reversal given the wide scope of these anti avoidance rules.

 

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