Entrepreneurs’ Relief (‘ER’) gives a tax rate of 10% on qualifying capital gains, rather than the full rate of 28%.
Several conditions have to be met both prior to and on the date that you sell your shares for this relief to apply. Our client met all conditions but due to a significant shareholder dispute had not actually received the proceeds for the sale of his shares for over three years. By the time he received the cash he no longer qualified for the relief.
Our client had been told by another professional that he did not qualify for the relief, which in this case was incorrect. The actual date that the shares were sold, for tax purposes, was the original date and the dispute did not change this. He was therefore able to meet the conditions and entrepreneurs’ relief did apply.
It is easy to see how the alternative conclusion was reached; however not digging deeper into the tax rules and case law could have cost this tax payer an extra £160,000.
Seeking independent tax advice from tax qualified professionals with expertise rather than background knowledge is essential when significant sums of tax are at stake.