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Entrepreneurs’ Relief - Share Exchanges

Someone “selling” their company by taking shares in the acquiring company may be in for a nasty surprise after 5 April 2008.

The new Entrepreneurs’ Relief, which comes into effect on 6 April, will reduce the capital gains tax due on selling shares from 18% to 10% only if the vendor:

  • worked for the company; and 
  • owned at least 5% of the ordinary shares in that company, carrying at least 5% of the votes, throughout the twelve months leading up to the sale.

Our experience is that these two criteria are often not met, either because the vendor does not work for the new company or because he holds less than 5% of its ordinary shares.

If you are likely to be affected by the new rules (including situations where the exchange has already happened) and would like to discuss what might be done to improve your position, please contact Cathy Corns or me.



Date: 10th March, 2008
Author: David Mansell


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