We have recently advised a family business where no one qualified for Entrepreneurs’ Relief.
Craig Simpson focus’ on the availability of Entreprenurs’ Relief and trust holdings.
“This is a first in my experience, but the client was rather surprised. Well-meaning trust planning over the years has led to personal shareholdings below the 5% threshold spread across a number of family members and trust holdings that do not qualify. The rules relating to trusts are complex, but to summarise the main points:
1. Shares held by discretionary trusts don’t qualify for Entrepreneurs’ relief.
2. Shares held by interest in possession trusts may qualify if there is a qualifying beneficiary.
a. A qualifying beneficiary must qualify for Entrepreneurs’ Relief in their own right (i.e. satisfy the 5% test) and have an interest in possession (other than for a fixed term) in the shares in the company.
Of course capital gains tax is not the only factor to consider as the trusts may have considerable benefits from an Inheritance Tax perspective, and not all companies will be sold.
It therefore makes sense to review all clients with trust holdings who might sell in the near future to ensure maximum tax efficiency.”
We can assist with a full Entrepreneurs’ Relief review, contact Craig Simpson firstname.lastname@example.org for more information.