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Recently a potential client asked us to review some changes they were planning to their business and to handle the necessary paperwork.

One of the directors was looking to resign from the family business but wanted to keep his shareholding to sell in the future.  The other shareholders had accepted his suggestion and were ready to go ahead with the plan.

What he hadn’t considered was the sale of the shares in the future. The retiring shareholder expected the sale to qualify for Entrepreneurs’ Relief, meaning 10% Capital Gains Tax would have been payable.  However, Entrepreneurs’ Relief would not have applied in this case and any gain would have been taxed at 28%, which is significantly more than he had expected.  This is because a shareholder must be an officer or employee of the company for the full 12 months before the sale of the shares.

Fortunately we were able to help to avoid this potential problem but it is a good example of how easy it can be to make costly mistakes.  It’s always advisable to take professional advice before making any changes to the structure of a business.

Please don’t hesitate to get in touch with Michael Burgess on 01782 279615 if there’s something you’d like to discuss.


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