Entrepreneurs' relief on trust shares

Entrepreneurs' relief on shares held in trust

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Hi,

My client is getting an declaration of trust written up by a solicitor for shares in a company in which he co-founded. The external investors didn't want my client owning the shares outright, as he's not involved in the operations, so the declaration of trust was deemed to be appropriate.

More than 5% of the shares of the company will be in trust to my client under this arrangement.

From a capital gains tax point of view, can my client claim Entrepreneurs' relief once the shares are sold, even though he doesn't own the shares outright?

On a related note, am I correct to say that dividends are simply taxed as if the shares were owned by my client, as he has the beneficial interest of the shares?

Thanks!

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By Tax Dragon
25th Oct 2017 14:57

What sort of trust? You say he owns the shares beneficially, but not outright. Either the trust means something (in which case, there are more tax consequences than you know about) or it's transparent (in which case, it does not meet the external investors' demands).

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By Vaughan Blake1
25th Oct 2017 16:07

This is another of those questions that begs the question "why did they do/say that"? Not owning the shares outright, because he is not involved in the operations sounds odd, and is maybe an excuse to conceal the real reason. This type of shenanigans usually involves a past misdemeanour/bankruptcy or anti competition clause somewhere along the line. With age comes cynicism!

If he is not an employee/officer of the company he won't get ER anyway. If he is either, then he must be involved in the operation to some extent.

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Replying to Vaughan Blake1:
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By Tax Dragon
25th Oct 2017 16:41

Quote:

With age comes cynicism!

The "why" question was begged in my mind too. I must be getting aged. I also wondered about who would appoint/be the trustees and similar. I thought perhaps the OP was concealing the real question (was that too cynical? perhaps not since, as you say, ER is not in point anyway in the question as asked)... hence my brief request for more info.

Deliberately brief, and deliberately phrased, for reasons akin to those Portia expresses below [sentiments with which I concur - and have expressed myself previously].

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By Portia Nina Levin
25th Oct 2017 16:24

If people just ignored the w@nkers who insist on posting half-@r5ed questions anonymously, maybe the quality of queries would improve.

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