In the recent P Hunt V HMRC it became obvious what does 5% means !
So the background is that Mr Hunt sold his 5% shares in the company and claimed entrepreneurs’ relief and paid less tax at the rate of 10%
HMRC argued that he does not qualify for ER ! and Mr Hunt must pay additional £180k tax.
To qualify for ER one:
- must hold shares for at least 24 months
- must hold at least 5% of the “share capital”
Definition of share capital became clear in this case which refers to the issued share capital not the number of shares.
Mr Hunt held more than 5% shares but the value of the shares were less than 5% of the issued share capital.
If you have any query on entrepreneurs’ relief or you are selling your business do contact us and we can help you avoiding unfortunate situations like Mr Hunt firstname.lastname@example.org or 01417750070