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December 21, 2018

Update: Entrepreneurs' Relief & Alphabet Shares

Further to our previous article Budget 2018: Entrepreneurs' Relief & Alphabet Shares (28/01/18), parliament has published an amendment to the Finance (No. 3) Bill in respect of the definition of a "personal company" for the purposes of Entrepreneurs' Relief.

The effect of this change is that holders of alphabet shares will not be prevented from claiming Entrepreneurs' Relief solely on the basis that they are not entitled to 5% of the dividends declared.

Under the amended legislation, a company will be your "personal company" provided that:

  1. You hold at least 5% of the ordinary share capital of the company
  2. By virtue of that holding, you hold at least 5% of the voting rights in the company, and
  3. Either or both of the following conditions are met:
    1. You are beneficially entitled to at least 5% of the profits available for distribution, and
    2. In the event of a disposal of the whole of the ordinary share capital of the company, you would be beneficially entitled to at least 5% of the proceeds.

The relaxation of the conditions will be welcomed by shareholders and advisors alike who were concerned about the far-reaching implications of the new rules.

Contact us today to discuss your tax requirements.
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