Entrepreneurs Relief Changes

There were some complex changes to this relief announced in the Autumn Budget last year which relate to share disposals. Following some changes made to one particular aspect, the rules now seem set to apply in their current form.

Minimum qualifying period

For disposals of shares on or after 6 April 2019, the minimum holding period over which certain conditions need to be met increased from one to two years, which means that anyone then selling shares will need to meet the “personal company” definitions throughout the two years before sale, as opposed to the current one year period that applies. So this may be a reason to consider selling shares before 6 April 2019 depending on your circumstances. The company must also meet the “trading” requirements throughout this period.

The personal company definition

In addition to the changes ahead mentioned in the previous section, a further complication was also introduced, which may affect more complex share structures.

A new 5% “economic ownership” test was introduced with immediate effect for disposals on or after 29 October 2018. This has the potential to affect share structures where there are multiple classes and may be detrimental to certain shareholders. If any shareholders in your business are concerned whether they still qualify for Entrepreneurs Relief under the new conditions, please contact us.

Your company’s Articles may need to be updated and for certain classes of shares it may be necessary to put in place changes now, and at least two years in advance of a potential sale.

For further information and guidance, please contact Jon Miles on 01225 325580 or email jm@richardsonswift.co.uk.