The fairly innocuous sounding announcement in relation to Entrepreneurs’ Relief (ER) in the Budget speech painted a far simpler picture than that contained in the draft legislation.
Mr Hammond announced that the qualifying ownership period was to be increased from one year to two years from 6 April 2019.
The part that is causing the most concern is the inclusion of the amendments to the definition of ‘personal company’ in the legislation. Any disposals of shares on or after 29 October 2018 will only qualify for ER if the shareholder is beneficially entitled to at least 5% of the distributable profits of the company and at least 5% of the assets available on a winding up. This is in addition to the existing requirement to hold at least 5% of the share capital and 5% of the voting rights.
These changes could cause real problems for companies with different classes of shares with differing dividend rights. If you are affected, we will be in touch shortly.