How JustAnswer Works:

  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.

Ask bigduckontax Your Own Question

bigduckontax
bigduckontax, Accountant
Category: UK Tax
Satisfied Customers: 1097
Experience:  FCCA FCMA CGMA ACIS
75394688
Type Your UK Tax Question Here...
bigduckontax is online now
A new question is answered every 9 seconds

do I qualify for entrepreneur relief.

Customer Question

From september 2011 until september 2013 I worked at a limited company and held 10% of shares with voting rights. I left two months ago. I still have 10% of the shares but no longer have voting rights. If the company is sold, do I qualify for ER?

Submitted: 1 year ago.
Category: UK Tax
Expert:  bigduckontax replied 1 year ago.
Hello, I'm Keith and happy to help you with your question.

HMRC guidance on ER is as follows:

'Entrepreneurs' Relief

Entrepreneurs' Relief allows individuals and some trustees to claim relief on qualifying gains made on the disposal of any of the following:

All or part of a business

The assets of a business after it has stopped trading

Shares in a company

The relief applies for the years 2008-09 onwards. There is a maximum lifetime limit of Entrepreneurs' Relief you can claim.

Who qualifies?

The relief is available for you as an individual if you:
are in business, for example as a sole trader or as a partner in a trading business

Hold shares in your personal trading company

Conditions you must meet

Depending on the type of disposal, you need to meet certain qualifying conditions throughout a qualifying year.

For example, you must have owned the business during the year that ends:

On the date your business was disposed of - if you're selling all or part of your business

On the date your business ceased - if your business has ceased

From what you say if the company is taken over and presumably your shares too as is normal then ER would appear to apply. ER helps reduce the capital gain realised from the share sale for the purposes of assessing any Capital Gains Tax due.
Customer: replied 1 year ago.
But if I left 2 months ago I would not be an employee for whole 'qualifying year' - that ends the day the business was sold. Does that make a difference ??
Expert:  bigduckontax replied 1 year ago.
With respect I was under the impression we were dealing with your 10% shareholding in the company and any ER available on disposal thereof. In that situation your position as an employee is not relevant. It is the share disposal date which is the key.

HMRT guidance [edited] says:

'ER must be claimed, by the individual in writing by the first anniversary of the 31 January following the end of the tax year in which the qualifying disposal takes place, that is one year and 10 months from the end of the tax year in which the qualifying business disposal is made. For a qualifying business disposal in the tax year 2012–13 (ending on 5 April 2013) you must make a claim for Entrepreneurs’ Relief by 31 January 2015.'
Customer: replied 1 year ago.

I think there's confusion with the terms in the hmrc guidance http://www.hmrc.gov.uk/helpsheets/hs275.pdf . 'personal company' means you are an employee and hold at least 5% shares with voting rights. It also says 'The one-year qualifying period ends generally on the date of disposal of the shares or securities.' So if the shares were to be disposed of on 30 Dec (say), do I need to satisfy the conditions of it being a 'personal company' for the 12 months preceding 30 Dec that year? Or does the fact that it's not a 'personal company' on date of disposal not matter? Thanks.

Expert:  bigduckontax replied 1 year ago.
I agree that HMRC guidelines are sometimes difficult to interpret, but it is accepted that the disposal of a shareholding in a company, particularly a private one, cannot immediately be achieved. The 'one year qualifying period' refers to share sales and we know that as far as you are concerned it was a personal company though matters might have changed after your employment terminated. I feel that a claim for ER would be successful should you need it. Remember you can make GBP 11,900 of gain before incurring CGT liability and maybe not need any ER at all. It all depends in simple terms upon the actual capital gain, the difference between the price you received and the cost of purchase and maybe some other capital losses brought forward from earlier tax periods.
Customer: replied 1 year ago.

Sorry for the delay. So are you saying that even if I'm not an employee, I can still qualify for ER?

Expert:  bigduckontax replied 1 year ago.
Yes, indeed. ER rules do require you to be an employee either as a director, partner, or a mere employee. It is designed to relieve an investor of the otherwise very high charges to CGT which might apply, effectively on cashing in his interest by extending his CGT annual personal allowance. There are time limits laid down. Everyone accepts that it takes time to arrange disposal of shares in private companies so there is time latitude. HMRC advise:

'Deadline

Tax year when you sold or closed your business; deadline to claim Entrepreneurs’ Relief is:-


2012 to 2013 31 January 2015
2011 to 2012 31 January 2014
2010 to 2011 31 January 2013'
bigduckontax, Accountant
Category: UK Tax
Satisfied Customers: 1097
Experience: FCCA FCMA CGMA ACIS
bigduckontax and 3 other UK Tax Specialists are ready to help you
Expert:  bigduckontax replied 1 year ago.
Thank you for your support.
Customer: replied 1 year ago.

Hi, I wanted to follow up on this - can you point me to any official guidance or material that supports your answer? I am neither a director, partner nor employee.

Expert:  bigduckontax replied 1 year ago.
For the purpose of ER that is irrelevant. The important thing is that you, as a shareholder, were in at the start.

Try Google and put Entrepreneur Relief in the question bar. The first item to come up is HMRC's full and comprehensive information on the subject.
Customer: replied 1 year ago.

I have read the HMCR guidance, but it seems to make it clear that I must be an employee or officer. Why do you say it is irrelevant but important that I was in at the start?


 


If you can you point me to the right part in HMRC's guidance that would be much appreciated.

Expert:  bigduckontax replied 1 year ago.
I have quoted HMRC's advice verbatim in earlier responses to your initial question.

JustAnswer in the News:

 
 
 
Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.
 
 
 

What Customers are Saying:

 
 
 
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
< Last | Next >
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
  • I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight. Bonnie Chesnee, SC
  • Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation. John Minneapolis, MN
  • Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with. Orville Hesperia, California
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C. Freshfield, Liverpool, UK
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex Los Angeles, CA
  • Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult. GP Hesperia, CA
 
 
 

Meet The Experts:

 
 
 
  • Andrew Baker(baktax)

    Personal Tax Adviser

    Satisfied Customers:

    756
    35+ years experience in income tax, CGT, non-residence
< Last | Next >
  • http://ww2.justanswer.com/uploads/baktax/2009-7-15_202414_Frame.jpg Andrew Baker(baktax)'s Avatar

    Andrew Baker(baktax)

    Personal Tax Adviser

    Satisfied Customers:

    756
    35+ years experience in income tax, CGT, non-residence
  • http://ww2.justanswer.com/uploads/teap007/2009-01-10_145815_bill_justanswer_for_profile.jpg TEAP007's Avatar

    TEAP007

    Tax Preparer

    Satisfied Customers:

    754
    Fully Trained Inspector of Taxes / District Inspector/ Team Leader/ Offshore Consultant/ 41 years
  • http://ww2.justanswer.com/uploads/BE/berduchwal/2011-6-7_84817_pict0854.64x64.jpg berduchwal's Avatar

    berduchwal

    Accountant

    Satisfied Customers:

    669
    Qualified accountant and bookkeeper running my own practice since 2008.
  • http://ww2.justanswer.com/uploads/JO/Josh2010/2012-4-29_19490_GettyImages80121770B.64x64.jpg Joshua's Avatar

    Joshua

    Lawyer

    Satisfied Customers:

    61
    LL.B (Hons), Higher Prof. Dip. Law & Practice
  • http://ww2.justanswer.com/uploads/RO/Ronaann/2012-3-19_23343_SSL22629.64x64.JPG Mrs-Tax's Avatar

    Mrs-Tax

    Tax Adviser

    Satisfied Customers:

    59
    Law Degree, 19 years in UK Tax.
  • http://ww2.justanswer.com/uploads/TG/TGraham12/2012-7-17_81212_bigstockBusinessHandshake508163.64x64.jpg Thomas's Avatar

    Thomas

    Solicitor

    Satisfied Customers:

    48
    Exposure to general tax issues
  • http://ww2.justanswer.com/uploads/struppiaml/2009-10-9_95150_anthony_business_002.jpg AnthonyL's Avatar

    AnthonyL

    Tax Adviser

    Satisfied Customers:

    19
    ATT, ATII, 12 years tax experience
 
 
 
Chat Now With An UK Tax Professional
bigduckontax
bigduckontax
Secretary
322 Satisfied Customers
FCCA FCMA CGMA ACIS