As the result of changes announced in the Autumn Budget, and now incorporated into the latest Finance Bill, not all ordinary shares necessarily qualify for the 10 per cent CGT entrepreneurs’ relief rate on disposal.
As mentioned in last month’s Budget newsletter the definition of a personal company was tightened up so that from 29 October the shareholder must have entitlement to at least 5% of the company’s ordinary share capital, voting rights, profits available for distribution, and assets available on the winding up of the company.
The shareholder, as before, will also need to be an officer or employee of the company.
This change means that certain “alphabet” and other shares with limited rights may no longer qualify for CGT entrepreneurs’ relief when disposed of. As a consequence of this change we may need to review the rights attaching to the shares that your company has issued and make changes to ensure that the shares qualify.
Added to the additional condition of a requirement of holding the shares for two years up to the date of disposal, further care is required in planning share structures to claim this valuable relief.
If you believe your company is affected by the above or for further information regarding the changes to legislation, contact your usual Beavis Morgan Partner.