Must own 5% of ordinary shares to qualify for CGT entrepreneurs relief
In order for a shareholder to qualify for CGT entrepreneurs relief on the disposal of their shares, they must be an officer or employee of the company (or group) and hold 5% or more of the company’s ordinary share capital and voting rights for 12 months prior to the disposal.
The company must also be a trading company or the holding company of a trading group throughout the same 12 month period.
In a recent tax case, the judge agreed with HMRC that in determining whether or not the shareholders held the required 5% of the ordinary share capital, all of the company’s shares should be considered except those with a fixed rate of dividend (preference shares). A lower court had previously decided that shares with no entitlement to dividends and voting rights could be disregarded.
For further information on CGT entrepreneurs relief, please contact Tracy Jenkins on 023 8046 1202.