ER relief

Is indirect ownership allowable?

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I have a pair of director clients who owned their trading company 50/50 for 10 years. About 18 months ago, the shares were transferred into a holdco to allow group relief of a loss making trading company, ownership of the holdco was 50/50.

They’ve just told me that they’re looking to sell soon. 

Have they lost ER, or is the indirect ownership allowable? (I assume it’s lost). If holdco sells the shares back to the individuals, will they need to wait 2 years to get ER? Or, could they sell the shares in holdco and get the ER relief there? The only other company in the group will have been dissolved by then. 

Thanks 

Replies (6)

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By Alex Perkin
02nd Jan 2019 18:02

This sounds like a can of worms! But in answer to your question they have lost ER unfortunately as Companies are not eligible for it, and don't pay CGT. The last suggestion you are possibly mentioning sounds overcomplicated, but I imagine the shareholding by Newco will be covered by SSE Releif so any disposal (provided the conditions are met) should be covered.

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By Tax Dragon
02nd Jan 2019 19:09

atleastisoundknowledgable... wrote:

They’ve just told me that they’re looking to sell soon.

Sell what?

Did s127 apply on the transfer to holdco?

I know tax isn't your strongest suit, but give us more than sawdust to plait. (Say Lion, you forgot to copyright that one!)

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Replying to Tax Dragon:
ALISK
By atleastisoundknowledgable...
02nd Jan 2019 22:00

“Sell what?”
The trading company, by whatever means.

“Did s127 apply on the transfer to holdco?”
Yes

“I know tax isn't your strongest suit”
Fair cop

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Replying to atleastisoundknowledgable...:
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By Tax Dragon
02nd Jan 2019 23:31

Ok, what I was getting at is whether there was any value other than in TradeCo. I take it there's not.

What, if anything, prevented a tax charge on the disposal some 18 months hence to HoldCo?

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By Matrix
02nd Jan 2019 20:06

Yes they can sell the shares in holdco and qualify for ER. The period is still 12 months increasing to 2 years for disposals after April 2019. You need to read the rules about the disposal of shares in holding companies of trading companies which are specifically mentioned as qualifying for ER.

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Replying to Matrix:
ALISK
By atleastisoundknowledgable...
02nd Jan 2019 21:51

Thanks Matrix.

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