Entrepreneurs relief for one retiring director

[ContrataxLtd]

Thanks for your help. I appreciate it is complicated. The other shareholder do not have 50K each to spare. I want to take out the 100K profit from the company. So is HMRC saying that if the other shareholder buy out my share using their personal money only then i can claim associated disposal ER.

Referring to the example from HMRC link around associated disposal "For example, you personally own a shop from which you trade in partnership with your brother. You have a 3/5 interest in the assets of the partnership and your brother 2/5. You reduce your involvement in the business so the interest is altered to 1/5 for you and 4/5 for your brother."

Hi Lyber

Go speak to your accountant about a company purchase of own shares:

https://www.gov.uk/government/upload...res.pdfhttp://

Yes there are hoops to jump through and plenty of paperwork so expect to be charged for this but on the assumption that the distribution would be treated as capital then you should then qualify for ER on this, again, assuming you meet the criteria for ER.

In essence it means you can extract cash from the company as capital without the remaining shareholders having to stump up the cash personally and thus increasing their base cost of their shares against which they may never get relief.

HTH

Martin
Contratax Ltd

[ian2012]

A company share buyback does look like an appealing option but the difficulty would be in convincing HMRC that it was for the benefit of trade of the remaining company rather than being undertaken for your own personal tax reasons (the "trade benefit" test)

Also if your other company is in a similar activity or field you'd fall foul of ER.

Company sharebuyback does allow you to get pre-clearance from HMRC however which means at least you'll know it will be treated as capital rather than income (unlike a challenge to ER which might happen years after the event).

[ContrataxLtd]

A company share buyback does look like an appealing option but the difficulty would be in convincing HMRC that it was for the benefit of trade of the remaining company rather than being undertaken for your own personal tax reasons (the "trade benefit" test)

Also if your other company is in a similar activity or field you'd fall foul of ER.

Company sharebuyback does allow you to get pre-clearance from HMRC however which means at least you'll know it will be treated as capital rather than income (unlike a challenge to ER which might happen years after the event).

Convincing HMRC that the 'trade benefit' test is passed for a retiring shareholder should be relatively straight forward in my opinion, I've certainly never had any issues with this myself. Added to this that you can get clearance from HMRC means you can be certain that you have a transaction that meets the tests for a capital distribution.

If you are in receipt of a capital distribution then ER shouldn't be an issue (assuming standard conditions met), the 2 year rule wouldn't come in to play here as that is anti avoidance around a capital distribution and with the clearance above you can be pretty much certain that nothing will come back to bite you down the line if structure properly.

Martin
Contratax Ltd

[MB2]

I would agree, we are doing this at the moment for a retired director/shareholder and we got revenue clearance for ER and also that the company can buy the shares back when it can afford it.