Entrepeneur's Relief

Entrepeneur's Relief

Didn't find your answer?

Hi

A client has come to me with an offer for his business of £1m from a competitor. They want to buy his one and only share in the company but will give him £600k on completion (in around two months) and £50k each month for 8 months to make the £1m.

In order to give him some security over receiving the installments, I may suggest he treats this as five seperate disposals.ie he sells 60% of his shares in two months then 5%, 5%, 5% etc in the subsequent months.

This will mean increasing his share capital to 20 ordinary shares. Obviously this is just a paper transaction to account for the disposal, however does this effect his entitlement to ER? He won't have owned the particualr shares for the twelve month period but has owned the original share in issue for about 20 years.

Any pointers, advice will be most welcomed.

Replies (2)

Please login or register to join the discussion.

avatar
By ChrisMcEnaney
18th Feb 2013 12:24

Shouldn't effect

From the way I understand ER, you must own over 5% of the company for over a year.

Thanks (0)
avatar
By law man
19th Feb 2013 13:31

Sale of shares in instalments

Consider whether there should be a share sale agreement. Usually the buyer of shares will insist on one - a foolish buyer would not require it.

From the seller's perspective you want the contract to say:

+ on dd/mm/2013 Buyer will buy 60% of shares for £600,000

+ on dd/mm/2014 Buyer will buy 5% of shares for £100,000

+ etc.

i.e. you want Buyer to commit to buy the shares at the outset.

However, check that an immediate contract to sell in the future has no adverse tax effects.

 

 

Thanks (0)