Entrepreneurs relief and joint ventures

Entrepreneurs relief and joint ventures

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Structure of a trading group is two trading subsidiaries, both 100% subsidiaries of a non trading holding company. The holding company is in turn held by three topcos each holding 33.3% of the holding company, there are three directors in the business and each has their own separate topco which they own 75/25 with their spouse. The spouses are all employees of the trading companies.

This structure was put in place about 5 years ago, the reasoning being to allow the payment of dividends to remove significant cash balances from the trading companies, the dividends being paid to the holding company and then through to the three topcos. At the time one director wanted to withdraw all of his dividend (incurring a significant personal tax bill) but the other two did not - so they retained the dividends within their own topcos, so not having to pay higher rate personal tax.

The understanding was that the shareholdings in the topcos would qualify for ER under the joint-venture mechanism. This no longer seems to work.

One of the directors is now considering selling his part of the group to the other two directors. Could ER be obtained via a share swap, so he and his spouse exchange their shares in their topco for shares in the main holding company? There is no rush for him to exit the business, so the one year holding requirement can be satisfied before the sale of his shares to the topcos of the two remaining directors.

I would appreciate any comments as to whether the share swap (his topco / main holdco) would fall foul of anti-avoidance?

Many thanks.

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Nichola Ross Martin
By Nichola Ross Martin
20th Nov 2015 14:55

I tried to answer this a while back and there is no posting

sorry, I have run out of time today, if you want to contact me I can talk it over on the phone.

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