Interestingly Entrepreneurs’ relief is available on a share disposal if all qualifying conditions are met for a year up to disposal. Therefore if a company has traded for a year up to disposal which only represents 10% (say) of the total ownership period then unrestricted Entrepreneurs’ Relief should be available.
By way of example consider the following:
Here the shareholders should (assuming other non-trade related Entrepreneurs’ Relief conditions are met) enjoy full Entrepreneurs’ Relief. HMRC generally accept that the company would be trading when the intention moved from investment to trading.
It would be advisable to keep detailed minutes to evidence the change in intention. Furthermore the investment asset should be ‘appropriated’ into trading stock. Although prima facie this triggers a corporation tax liability an election can be made to defer this chargeable gain until the property is actually sold.
Therefore shareholders are effectively able to enjoy Entrepreneurs’ Relief in respect of what are commercially investment gains.
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