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Entrepeneurs Relief on sale of shares

Entrepeneurs Relief on sale of shares

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Was hoping someone could help me with the following:

Husband - Owns 5% of shares (Director)

Wife - Owns 45% shares (Not a director/employee)

Both are due to sell their shares and obviously would like to pay 10% tax on the sale.

The husband qualifies ok for the relief, however regarding the wife's shares, I'm think we have two possible options:

Option 1 - She isn't an employee/director,but could we not argue that because of  her significant shareholding and the fact that she attends all meetings she could be viewed as a non appointed director/employee, and would therefore meet the 1 year employee/director rules. (not sure if I'm clutching at straws here?) What do HMRC class as being employed? Could you be seen to be employed by a company even though you do not receive a PAYE salary from then?

Option 2, Transfer her shares to the husband. These would then be sold on immediately, meaning husband would not have owned the shares for atleast 12 months, however could we not argue that because the wife held them for a sufficient period, and the shares were transferred on a NGNL basis that this is sufficient for the 45% shareholding?

I would be interested to see if anyone has had any experience in any of the above arguments.

Replies (3)

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By gbuckell
30th Jul 2012 10:34

No & yes

Option 1

If she was on the company records as an employee even if not remunerated, this might stand a chance but to try deeming her an employee without any evidence is, I feel, clutching at straws and almost certain to fail.

Option 2

This is the way forward. No arguments are required. The husband has satisfied the conditions and so any shares transferred to him automatically qualify. Had the husband held less than 5% this would not work. There is no rule to deem the husband's ownership period to include his wife's.

 

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By Jigs
30th Jul 2012 19:54

Thanks, so the whole 50% will qualify for entrepreneurs relief on the basis that his 5% shareholding qualifies, even though he may only hold the 45% for a day?

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By blok
31st Jul 2012 08:26

.

the company is his personal company because he holds 5%.  Him getting the other 45% doesn't change anything.  The company is still his personal company. just now though he has more shares to sell. so 10% on the lot.

 

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