Entrepreneurs relief

[craigy1874]

Tell your accountants in the 2 years before disposing of the shares that you hold (regardless of how long you actually hold the shares for):

1. You are an employee or officer (e.g. director) of the limited company.
2. It is your personal company (i.e. you own at least 5% of the shares and voting rights of the company)
3. The limited company's main activity was trading (or a holding company of a trading group).

In other words, there's no requirement to actually hold the shares for 2 years. You just need to meet criteria 1 - 3.

Entrepreneurs' Relief - GOV.UK

It just goes to show how precisely you have to read the tax rules/legislations.

Agreed, you will get ER on all of the share disposals.

[AR Tax]

Please could you elaborate.

My account told me:

If my wife sells her 50% of the business back to me today and I dissolved the business in 1 years time, I would only be able to claim entrepreneurs relief on the 50% of the business which I have owned all along. I would not be able to claim entrepreneurs relief for the 50% of the business which I have only owned for 1 year (i.e. the shares I purchased from my wife).

The account said I need to have owned the shares for at least 2 years, prior to disposing of them in order to claim entrepreneurs relief.

Was this wrong?

Tell your accountants in the 2 years before disposing of the shares that you hold (regardless of how long you actually hold the shares for):

1. You are an employee or officer (e.g. director) of the limited company.
2. It is your personal company (i.e. you own at least 5% of the shares and voting rights of the company)
3. The limited company's main activity was trading (or a holding company of a trading group).

In other words, there's no requirement to actually hold the shares for 2 years. You just need to meet criteria 1 - 3.

Entrepreneurs' Relief - GOV.UK

It just goes to show how precisely you have to read the tax rules/legislations.

[Iliketax]

Please could you elaborate.

My account told me:

If my wife sells her 50% of the business back to me today and I dissolved the business in 1 years time, I would only be able to claim entrepreneurs relief on the 50% of the business which I have owned all along. I would not be able to claim entrepreneurs relief for the 50% of the business which I have only owned for 1 year (i.e. the shares I purchased from my wife).

The account said I need to have owned the shares for at least 2 years, prior to disposing of them in order to claim entrepreneurs relief.

Was this wrong?

Yes.

Ask your account to double check the legislation. The test is about whether the company has been your personal company throughout those two years. Or you could just google something like "entrepreneurs relief additional shares".

[Untouchable1]

There is no conundrum as that is not how entrepreneurs' relief works. It's all about whether the shares you dispose of are in your "personal company", not when you got any particular shares.

Please could you elaborate.

My account told me:

If my wife sells her 50% of the business back to me today and I dissolved the business in 1 years time, I would only be able to claim entrepreneurs relief on the 50% of the business which I have owned all along. I would not be able to claim entrepreneurs relief for the 50% of the business which I have only owned for 1 year (i.e. the shares I purchased from my wife).

The account said I need to have owned the shares for at least 2 years, prior to disposing of them in order to claim entrepreneurs relief.

Was this wrong?

[Iliketax]

Any bright ideas on how to solve this conundrum?!

There is no conundrum as that is not how entrepreneurs' relief works. It's all about whether the shares you dispose of are in your "personal company", not when you got any particular shares.

[Patrick@Intouch]

You could reclassify your wife's shares as Ordinary Class A shares. This would mean that you would be the sole recipient of dividends when you declare them as being payable to holders of the standard Ordinary shares and your wife would still be entitled to a share of the distribution on wind up.

You would then benefit from each of your annual exempt capital gains allowance as well as both qualifying for ER.

You could also then use your wife's dividend allowance to pay her £2k per year while the company is still operating.

[TheCyclingProgrammer]

Presumably she has agreed to give you back her shares and there was no prior agreement that she would give them back at some point?

[Manic]

Hi,

Situation:

3 years ago I transferred 50% ownership of the company to my wife, because she did not have a permanent role and took on a couple of contracts, which went through the company.

Now she has gone back to permanent job.

I want to transfer her 50% back to me so that I own 100% of the company. This is so when I declare dividends I get all the money .

However, the implication is that I would not be able to claim entreprenuers relief for the 50% of the company that I just re-acquired, if I wind down the business within the next 2 years - which there is a strong possibility I might.

Any bright ideas on how to solve this conundrum?!

Cheers,
Untouchable1

Bearing in mind that you have a 2k dividend allowance, personal allowance (@ 0%) and a 7.5% band then it makes sense to use these up before ER. Look at how you might pay a dividend in March 20xx and then the same in April 20xx the push the remainder via MVL. The difference in tax on the remainder might not be worth the "hassle" of MVL.

[Untouchable1]

Hi,

Situation:

3 years ago I transferred 50% ownership of the company to my wife, because she did not have a permanent role and took on a couple of contracts, which went through the company.

Now she has gone back to permanent job.

I want to transfer her 50% back to me so that I own 100% of the company. This is so when I declare dividends I get all the money .

However, the implication is that I would not be able to claim entreprenuers relief for the 50% of the company that I just re-acquired, if I wind down the business within the next 2 years - which there is a strong possibility I might.

Any bright ideas on how to solve this conundrum?!

Cheers,
Untouchable1