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Subsequent trading after Entrepreneurs Relief

Is my client able to claim ER if they intend to trade after sale of shares.

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A client has recently sold all of his shares in his Company to a third party but intends to refer new work to the Company going forward from which he will receive a referrers fee. 

This might amount to a fairly significant sum depending on how successful he is but I wanted to see contributors opinions on whether this is likely to cause any problems with claiming ER on the initial sale of his shares.  I had read about the TAAR to prevent tax advantages when companies are dissolved but wasnt sure if this would also apply in these circumstances or if there is something similar in normal sales of shares?

The reason for the sale of the company shares was simply to take advantage of the offer made by the third party and reduce workload and pressures rahter than any intention to avoid a charge to income tax.

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By susanreed
19th May 2020 17:10

Hi,

As long as your client fulfils the conditions in TCGA s169I , then he is entitled to ER on the sale - he must have owned the shares for at least 1 year prior to sale, worked for the company and owned at least 5% of the shares.

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Replying to susanreed:
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By chrispinches
19th May 2020 17:32

Thanks Susan,

He fulfils all of those criteria so hopefully all will be okay. I just had in the back of my mind somewhere about it not being a good idea to be involved in a similar trade after the sale but it might be that I was thinking of the Anti Avoidance provisions around Phoenixing.

Thanks for the reply.

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Replying to susanreed:
Psycho
By Wilson Philips
19th May 2020 17:54

I think you need to update those criteria

EDIT - posted without reading TD’s post first

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By Tax Dragon
19th May 2020 17:43

With the necessary updates, I agree with susanreed. The TAAR concerns itself with liquidations and manipulations. A simple, genuine sale should not be caught.

Any referrer fee is obviously income.

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Replying to Tax Dragon:
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By chrispinches
19th May 2020 17:52

Thanks,

Its good to get confirmation from a couple of knowledgeable people - I tend to overthink these things sometimes!

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By pauljohnston
26th May 2020 10:46

As I read your post he had a business that has been sold. He has a new business that is a referring agent that gets paid commission on any deal introduced.

Although not a lot of info here if the first business was trading in making widgets and the second is a commision refereal business I cant see that there will be any problems.

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Replying to pauljohnston:
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By chrispinches
26th May 2020 12:18

Thanks Paul,

The set up is as you have described and I think on reflection I was confusing the rules around liquidating a Company and getting Capital treatment and then restarting but the same rules do not apply on sales of businesses as far as I can see.

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