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Entrepreneur's Relief - adding to your holdings?

ER - buying more shares - do they qualify for ER immediately?

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Daft question, and probably with a simple answer, but I can see no example anywhere that covers it!

Suppose that Fred has owned 10% of Fred n Bob's Toyshop Ltd's shares since say 2010, and buys some more shares off Bob, taking his holding to 20%, on say 6 August 2020.  Then they get an offer to sell up, and do so on 6 September 2020.  As Fred's original 10% qualified for ER, (>2yrs, trading co etc etc) does the recently purchased 10% also qualify? immediately on purchase?

& Is that specifically covered in the legislation?  (Anyone got a link?)  Or is it covered because the legislation merely states qualifying conditions, which if met cover all shares owned no matter purchase date?

 

Thanks!

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By Mr_awol
20th Aug 2020 14:37

DeathandTaxes222 wrote:

Daft question, and probably with a simple answer, but I can see no example anywhere that covers it!

Suppose that Fred has owned 10% of Fred n Bob's Toyshop Ltd's shares since say 2010, and buys some more shares off Bob, taking his holding to 20%, on say 6 August 2020.  Then they get an offer to sell up, and do so on 6 September 2020.  As Fred's original 10% qualified for ER, (>2yrs, trading co etc etc) does the recently purchased 10% also qualify? immediately on purchase?

& Is that specifically covered in the legislation?  (Anyone got a link?)  Or is it covered because the legislation merely states qualifying conditions, which if met cover all shares owned no matter purchase date?

 

Thanks!

No

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Replying to Mr_awol:
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By Greenheys
20th Aug 2020 14:47

That's interesting, Mr awol.

Have a look "here", half way down.

https://www.whitefieldtax.co.uk/maximising-entrepreneurs-relief-for-dire...

"Do not lose out when considering the 24 month qualifying period

All three qualifying conditions – (1) personal company, (2) trading company or holding in a trading group, and (3) you must be officer or employee – must be met for the relevant 24 month period.

However, once you meet the personal company condition yourself and qualify for ER, any new shares you acquire will also qualify for ER (even if those newly acquired shares are not held by you for the relevant 24 month period)."

Are they right?

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Replying to Mr_awol:
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By Tax Dragon
20th Aug 2020 14:48

Oh.

I was thinking "yes(*)" (assuming you're not being a BADR/ER pedant).

(*) subject to....
- the offer not having been on the table before the sale from Bob to Fred (on the timescale given, that's hard to believe)
- employment related securities rules
- something else which has slipped my mind while I was typing the above.

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Lone Wolf
By Lone_Wolf
20th Aug 2020 14:54

DeathandTaxes222 wrote:
ER - buying more shares - do they qualify for ER immediately?

TCGA 1992 s169I (6) should help with this particular aspect.

"Condition A is that, throughout the period of 2 years ending with the date of the disposal–

(a)the company is the individual’s personal company and is either a trading company or the holding company of a trading group, and

(b)the individual is an officer or employee of the company or (if the company is a member of a trading group) of one or more companies which are members of the trading group."

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By Dib
20th Aug 2020 15:01

Yes. The requirement is merely that the company is the shareholder's personal company throughout the 2 year qualifying period (other conditions being met as regards company trade and Fred being an officer or employee of the company). As Fred has held a 5% shareholding for the 2 years prior to disposal then, assuming that holding gave him the necessary economic rights, all the shares disposed of by Fred on 6 September 2020 will qualify.

Edit - need to type more quickly. When I started responding there was only Mr Awol's reply!

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Replying to Dib:
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By DeathandTaxes222
20th Aug 2020 16:49

Thanks Dib :)

A bit strange that such a wrinkle hasn't gotten more coverage!

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Replying to DeathandTaxes222:
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By Tax Dragon
20th Aug 2020 17:13

It's well covered for spouses - the situation when it's most likely to be relevant. With Fred and Bob, there are some "subject to"s, as noted above.

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RLI
By lionofludesch
20th Aug 2020 17:51

I vote yes.

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