Government changes tack on Entrepreneurs’ Relief, following calls from accountants
The Finance Act 2019 was passed into law earlier this month, giving legislative effect to many of the announcements made by the Chancellor at his Budget in October last year.
One of the most eye-catching announcements he made related to Entrepreneurs’ Relief (ER) and the conditions that must be met in order to benefit from a 10 per cent rate of Capital Gains Tax (CGT) on disposing a shareholding in a business.
Most of the press coverage related to the extension of the time that an individual must have owned shares in the business in order to benefit from one year to two years.
However, there was a more technical change to the criteria, which looked set to make it impossible for holders of so-called alphabet shares – a class of share that assigns varying rights to different shareholders – to claim ER.
Under the Government’s original plans, shareholders claiming ER would have had to have been entitled to a minimum of five per cent of the distributable profits and the net assets of the company in question. This is in addition to the pre-existing requirements to hold a minimum of five per cent of the business and voting rights and to be an employee or officer of the business.
The Government’s original plans would have been a significant impediment to claiming ER for holders of alphabet shares, as they are not necessarily entitled to this level of profit or assets, and so the proposal was opposed vehemently by accountancy bodies, including the ICAEW.
Following these representations, the Government proposed an alternative test to take alphabet shares into account. This test is based on an individual’s entitlement to the proceeds of the hypothetical sale of the entire company.
The test now appears in the legislation as follows:
(3) For the purposes of this Chapter a company is a “personal company” in relation to an individual if—
(a) the individual holds at least 5% of the ordinary share capital of the company,
(b) by virtue of that holding, at least 5% of the voting rights in the company are exercisable by the individual, and
(c) either or both of the following conditions are met—
(i) by virtue of that holding, the individual is beneficially entitled to at least 5% of the profits available for distribution to equity holders and, on a winding up, would be beneficially entitled to at least 5% of assets so available, or
(ii) in the event of a disposal of the whole of the ordinary share capital of the company, the individual would be beneficially entitled to at least 5% of the proceeds.
If you hold alphabet shares, it can be challenging to determine whether you would be entitled to claim ER on the disposal of your shareholding.
Contact us today for a review of your entitlement and advice on the changes needed in order to qualify.
London Mayfair and Harrow -based accountancy firm signals corporate and international ambitions with appointment of new CEO
A Mayfair and Harrow -based accountancy firm has signalled its ambitions for the future with the appointment of a new Chief Executive Officer tasked with developing the firm’s corporate and international services.
Tariq Charles Anthony Husain joins Macalvins following two decades working in the City in international outsourced business services, capital markets and private client services.
Prior to joining Macalvins, Tariq was Partner and Head of Global Business Services at MHA Macintyre Hudson, having previously been Regional Director, EMEA of TMF Group.
Tariq’s track-record means that he brings a wealth of experience in corporate and international matters that will feed into the firm’s rapidly expanding services in these areas.
Shailesh Patel, Founding Partner at Macalvins, said: “We are looking to rapidly expand our services for corporate and international clients – both those looking to trade overseas and those based overseas looking to trade here.
“Tariq brings with him important skills and experience from the corporate world that will help us achieve this and both expand and improve the quality of our services to our clients.
“We are delighted to welcome Tariq to the team.”
Tariq added: “Macalvins’ ambitions as a firm to expand the quality and range of both its corporate and international services is what drew me here.
“I am excited to be able to work as part of a team providing first-rate advisory and outsourcing services to increasing numbers of corporate and international clients.”
Beyond his work with corporate and international clients, Tariq will be leading the firm’s investment in technology and infrastructure to enable an increasing number of clients to benefit from the high levels of personal service Macalvins takes pride in offering.
He will also be leading the firm’s ambitious acquisition strategy, which is a key element of its plans to deliver its services to more clients in London and overseas.
Tariq said: “Client service is paramount and we want to make sure that as many clients as possible benefit from the high levels of personal service we offer.”
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