Enrepreneurs relief on share sale

Enrepreneurs relief on share sale

Didn't find your answer?

I'm fairly sure I know that answer to this but can't find anything absolutely definitive so would appreciate some clarification from the brains trust:

Husband has shares in personal trading company - issued 2005.

He transfers half to spouse, (for nil consideration), in Jan 2013, (correcting an error as they should have been joint from the start).

Both lots of shares sold in August 2013.

Both husband and wife are paid employees and all other entrepreneurs relief qualifying conditions are met.

Q - does the wife fail to qualify for entrepreneurs relief on the basis that she has held the shares for less than a year, or is her deemed acquisition date, (for ER), the same as her husband?

Any/all comments/help appreciated.

Monty

Replies (14)

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By Steve Kesby
09th Oct 2013 13:07

It fails

The transfer from husband to wife is an actual disposal and acquisition, but is deemed to take place at a consideration that produces neither gain nor loss. There's nothing in the ER legislation that purs the transferee spouse in the transferor's shoes.

If you can produce contemporaneous evidence that the husband had always held the shares as the wife's bare trustee/nominee, such that the wife always had beneficial ownership, then she will be entitled to ER in her own right.

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By User deleted
09th Oct 2013 14:19

We often ...

... come across instances of new companies where the shareholdings are not as intended - but usualy resolved within a few months. Why did it take 8 years for the "error" to come to light?

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Replying to TomMcClelland:
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By unclemonty
09th Oct 2013 16:12

8 years!

The husband always believed they were held 50/50 but the 'error' came to light when the buyout was mooted. I advised that he should wait until a year after the spousal transfer but the purchaser wouldn't delay the deal so he had to bite the bullet. He's now telling me that he wants ER on the lot but I've advised him that he can't have it.

He won't like this confirmation!

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By cparker87
09th Oct 2013 14:44

Eye opener

Good job I've never dealt with this because I was simply under the impression "the new shares stand in the shoes of the old ones" but I think that's re Restructures? Oops :)

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By Steve Kesby
09th Oct 2013 15:11

Or maybe taper relief?

It used to be the case that for taper relief purposes that the transferee spouse inherited the transferors period of ownership (but whether an asset was a business or non-business asset in the period of ownership was determined by reference to the spouse who made the disposal).

Then ER replaced taper relief, but was modelled on retirement relief. So there's still an expectation, I think, that the old taper relief inheritance will also apply for ER purposes, but it doesn't.

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By John R
09th Oct 2013 16:35

Dividends

If the husband thought the shares were always 50/50 have dividends always been paid on that basis? If so, perhaps this is evidence that the shares were held jointly.

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By User deleted
09th Oct 2013 16:35

I'm assuming then ...

... that no dividends have been paid during the last 8 years? (If they have, to whom?)

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By unclemonty
09th Oct 2013 16:50

Dividends paid...............

..............but credited to joint DLA. Declared on each individual's tax return.

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By User deleted
09th Oct 2013 18:53

So ...

... the tax returns have been wrong for up to 8 years then? Oh dear ...

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By RFL H
10th Oct 2013 08:45

Annual Returns

This is the reason I always check the annual returns..

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By blok
10th Oct 2013 12:46

.

why didnt the husband just sell them all and claim ER on the whole?  i.e. why was the inter spouse transfer made?

Quiet separately  - is there an argument that the husband held these shares on constructive trust for wife for years?  A case (was it Buck?) recently hinted that constructive trusts can be implied from actions of the parties.

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Replying to Paul D Utherone:
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By User deleted
10th Oct 2013 13:28

.

blok wrote:

why didnt the husband just sell them all and claim ER on the whole?  i.e. why was the inter spouse transfer made?

To benefit from 2 annual exemptions perhaps?

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By blok
10th Oct 2013 16:24

.

small beer though!

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By Steve Kesby
10th Oct 2013 16:45

There was a case...

... where H&W purchased a property from joint funds but it was only in the name of one, and when it came to be sold, the FTT (within the last couple of years) held that the beneficial ownership was joint. I think they might have been jointly declaring some rent along the way.

I've not been able to find it though. I just came up with Bingham, where all the money in a joint account was held to be under the beneficial ownership of the person who provided the original funds.

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