ER and no longer an employee

ER and no longer an employee

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I may be going nuts but part of me seems to recall that it is possible for someone to qualify for ER even if they are no longer an employee or officer as long as they have only recently ceased to be an employee or director. In this case a director retired in March and looking to sell their 15% ownership. They don't want to go back on the payroll but will do if need be, but something makes me think there's an exception as long as the shares are sold within a reasonable time of giving up employement. Can anyone shed any light on this?

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Head of woman
By Rebecca Cave
21st May 2014 10:42

Can get ER if still a director of the company

The rule for entrepreneurs' relief when disposing of shares is that you must be an employee or officer of the company for the full 12 period ending with the date of disposal. Did the individual resign his directorship at the same time as resigning as an employee?

Putting the former director back on the payroll won't help unless he is going to wait another year before selling his 15% stake. The is a slim chance that the individual could argue he was still 'employed' by the company although no pay was received, as Mrs Corbett successly argued in this case:

http://www.financeandtaxtribunals.gov.uk/judgmentfiles/j7682/TC03435.pdf

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By Steve Kesby
21st May 2014 10:50

No...

... they have to be an officer or employee in the 12 months preceding the sale of the shares (or the company ceasing to be a trading company/holding company of a trading group).

What you're thinking of is the recent FTT decision where the wife ceased to be an employee legally (to facilitate the sale of the company), but continued to walk and quack like an employee. It is only FTT though, so non-binding and HMRC might well appeal, but I haven't checked whether or not they have (because I'd need to remember the name of the case!).

EDIT: Crossed again! There doesn't seem to be an appeal in.

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