In the November 2018, we published an article on the important changes to CGT entrepreneurs’ relief included in the latest Finance Bill that could have the effect of denying the relief to certain employee shareholders. As the result of lobbying by the professional bodies the government have made a late change in the Finance Bill to the definition of “personal company” so that fewer shareholders will be denied the relief when they dispose of their shares.
The normal test is that the shareholder is required to be entitled to at least 5 per cent of the company’s ordinary share capital, voting rights, profits available for distribution, and assets available on the winding up of the company.
The amendment provides an alternative test which would allow relief where the individual is entitled to at least 5 per cent of the sale proceeds in the event of a disposal of the whole of the ordinary share capital of the company, even if the 5 per cent test in relation to distributable profits and assets on a winding up was not satisfied.
This remains a complex area and we would suggest that you contact us to review your company’s share structure to check whether particular shareholders would be entitled to relief for their shares.
Whether you are in business as an individual or as a corporate, you will want to ensure that you pay no more tax than you are legally bound to do. Our experts at Beavis Morgan can ensure your tax affairs are as efficient as possible to fit your circumstances, and we can look ahead to retirement and inheritance tax planning.
For more information and to discuss your tax affairs in further detail, please contact your usual Beavis Morgan contact.