A client was managing director of the company he was employed by. He acquired 1% of the share capital for £11k and later a further 4% for £nil (company was bought out of adminstration hence nil value - all documented by solicitors). He agreed a severance package in Nov 14 having held the 4% for more than one year and sold the shares to another individual still involved with the company (again all documented by solicitors)
The fact that the total 5% shareholding was acquired in two tranches doesn't affect the ability to claim Entrepreneur's Relief does it? I can't find anything that suggests if does but there is £000s of tax at stake so figured best to confirm with the learned Aweb community.
Assuming I'm correct then the capital gain = (disposal proceeds) - (£11k) - (legal fees relating to disposal)
Thanks in advance
Replies (6)
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Agree
The company should be the individual's personal company (169S(3) throughout the period of one year ending with the disposal. So if 5% of the ordinary share capital + voting rights are held for more than one year, as you say, it should qualify. Legal fees should qualify under s.38(c).
Edit: This answer is only a response to the query raised and hasn't looked in to other eligibility conditions
Not trying to through a curb ball but if it was bought out of administration then I would have thought the business in question changed to a new company (as the administrator tends to act for a company/business and not sell the investment shares) OR was it a waiver of liability which really acted as the consideration. Not sure ER would apply if the shares are in different companies - or at least the time clock would be restarted.
There is also a question given the lack of detail in the question, whether the one year ownership condition was met by the tax payer before cessation of the trade if it had not started trading again.
Curb ball
That cheered me up no end :)
I'm not laughing at you, I'm laughing with you (I hope you are laughing!)
Incidentally, 'curb ball' is a real thing, it was called 'curbie' when I was younger and is a game young hoodlums play which was great fun to play but is now something I view with terror if it is played near my car.