Entrepreneurs Relief

lebowski1980

Hi All

I bought a 10% shareholding of a business in 2015 that i have been employed in for 7 years. I became a director at the point of shares purchase. The business is a UK subsidiary of a foreign group company that is now being sold privately (the company is not listed on any exchange).

I expect to make a profit on the initial investment (after capital gains allowances)

Would i qualify for Entrepreneurs relief on this sale? I've had a look on HMRC but still not qute clear on if i meet the requirements.

Many thanks

tebthereb

Is the company, in which you own shares, a trading company? Do your shares give you 10% of the ordinary share capital, with no funny conditions (such as on your entitlement to vote, profits, etc)?

If so then yes it sounds as though you should qualify. As always if the gain is sizeable I would be engaging an accountant to make sure any Entrepreneurs’ Relief claim is made properly.

PaulCooper

Pretty sure the answer is yes, based on what you've said.
Here's a thought, if the company you own the shares in is about to pay a dividend or has retained earnings that you're tempted to pay out to shareholders before the deal goes through You might want to get the company buying the business, to buy the money that is tied up in the business (dividends & retained earnings). It's cash neutral to them. This way it becomes part of the purchase price & will be taxed at 10% (Entrepreneurs relief) as opposed to your normal (presumably 40%) tax rate.
Went through this a few years ago and nobody was pointing that out to us (not even top tier auditors) Saved us quite a lot
Paul

Pennywise

PaulCooper wrote: »

Went through this a few years ago and nobody was pointing that out to us (not even top tier auditors) Saved us quite a lot

Yes, very basic tax planning that general practice accountants throughout the country do each day. I'm a one man band and do that kind of planning for all my limited company clients who are selling up or liquidating. Smaller firms usually have a better angle on the wider picture.

"Auditors" aren't usually tax advisors - they usually specialise in audit, so won't really know about tax planning. The firms would have tax planning departments who would know this kind of thing. But it's not something that would be expected to come out during an audit. With the big firms, if you want specific advice, you generally have to ask for it and get referred to the relevant department.