What A Relief: HMRC Makes Minor Concession For Entrepreneurs
04 August 2010
On a share for share exchange, HMRC have confirmed that all the conditions for Entrepreneurs' Relief can be established on a 'look through' basis, meaning that the time periods can be aggregated in considering whether an individual qualifies for the relief.
To qualify for Entrepreneurs' Relief, the following conditions must be met for at least one year ending on the date of disposal of the shares:
1) The company must be a trading company or a holding company of a trading company;
2) The shareholder must own 5% if the ordinary share capital in the company, which allows them to exercise 5% if the voting rights; and
3) The shareholder must be an officer or an employee of the company or another company which is a member of the trading group.
Previously, HMRC had said that only condition 2 could be 'looked through' meaning that a shareholder could aggregate the period of ownership of the shares, but this was not true of the other conditions. However, their recent confirmation extends the 'look through' principle to all the conditions for Entrepreneurs' Relief.
This is good news for taxpayers considering the increased importance of Entrepreneurs' Relief following the rise in the lifetime allowance from £2million to £5million in the Coalition's emergency budget.
for further guidance on these issues please contact John Barnett
by email or telephone on +44(0) 117 902 2753.