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Taking the tests
Key points
- The original share capital and voting tests remain.
- A new economic test applies to disposals from 29 October 2018.
- As well as the original tests new conditions consider amounts available for distribution and sale proceeds.
- Determining the order of application of the tests.
- An example of the rules in practice.
- The position may need to be considered at the end of the accounting period which will delay confirmation of entrepreneurs’ relief entitlement.
- Sale proceeds are determined using the market value of the ordinary share capital at the disposal date.
- Care is required when dealing with preference shares.
HMRC has published brief guidance on the changes made to the 5% test for entrepreneurs’ relief that were first announced in the 2018 Budget on 29 October 2018 and amended on 21 December 2018. This test is relevant to individuals who own shares in trading companies in which they are employees or directors. The position of trusts...
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