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ER relief on Capital distribution

with changes in shareholdings split between spouses in the last year, but qualifying conditions met

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Hi, I have a client, H & W company who is wishing to wind up the ltd Co, since both have now taken employed jobs and the company has just ceased trading.

Qualifying conditions had been met for ER relief, the company has been trading for about 10 years and H& W share split was 40:60. Both were directors and employees.

However last year a share transfer was made to change the split to H: W 90:10 (since W had taken another job).

So, my question is simply, do the 50 transferred shares not qualify for ER, since they are then not continuously held by one shareholder for 2 years?

Or because both shareholders qualified, and the transfer is between them is ER available on the whole amount?

Responses are much appreciated.

Replies (5)

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By Rweaver
22nd Jun 2021 17:29

None of the shares will qualify for “ER relief”.

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Replying to Rweaver:
By Paul Crowley
22nd Jun 2021 17:34

Because it is now BADR

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22nd Jun 2021 17:44

Both shareholders appear to meet the qualifying conditions for 2 years before disposal, e.g. held at least 5% of voting rights, are employees/directors, personal trading company, etc. Therefore both shareholders should qualify for BADR (formerly known as ER) in full on all their shares.

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By Tax Dragon
23rd Jun 2021 07:12

You have the advantage of a posting history and didn't ask anonymously. The following comments are accordingly intended to help. (And I hope they do - though post back if I've fumbled it.)

I put "the most basic entrepreneur relief guide" into the default search engine on the device I was using. It pointed me to HS275.

It was an out of date version of the helpsheet, so I searched on HS275.

(Try both searches for yourself.)

Happily HS275 answers your question. Neither rule you hint at (period of ownership of shares; deeming extension of such ownership by reference to spousal ownership on lifetime inter spouse transfers) exists. The condition GR mentions does exist.


1. You say wife has another job. She needs to have remained an office holder or employee of the company, as HS275 explains.

2. The second search actually brought up some more basic (entry level) guidance ( This is aimed at non-accountants/agents. HMRC expects accountants/agents to be able to cope with more detailed guidance. So do I. Imho you can't rely on the guidance for non-professionals if you're a professional. Helpsheets are your entry level. Manuals are better. And we'll save the best for another time.

3. Acquisitions of shares (such as that by H last year) by office holders and employees always give rise to thoughts about ERS. Given that the acquisition coincided with a change of W's working pattern, those thoughts may be more focussed than usual. The reality is that no ERS charge will end up biting here, but I'd probably include a caveat somewhere myself, just in case.

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By SteveHa
23rd Jun 2021 11:34

For clarity - and in support of both GR and TD, shares do not qualify for BADR, individuals do. Provided the individual meets the conditions, then their holding will have BADR available.

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