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Ordinary share capital and entrepreneurs’ relief

02 July 2019 / Sam Hart
Issue: 4702 / Categories: Comment & Analysis
Out of the ordinary

Key points

  • A recent First-tier Tribunal decision illustrates the importance of defining ordinary share capital.
  • In order to determine whether a 5% hurdle has been met consider all shares in the company excluding only those with both no right to profits on a winding up and which carry a dividend at a fixed rate.
  • HMRC argued that the ‘dividend at a fixed rate’ requirement of ITA 2007 s 989 was met.
  • The tribunal held that if preference dividends were not paid the effective rate was compounded and therefore not fixed; the shares therefore qualified for relief.
  • The new equity and economic substance tests would probably now prevent relief being given.
  • HMRC has published new guidance on shares.


Ever since its introduction in 2008 capital gains tax entrepreneurs’ relief has been subject to various and multiple tweaks and 2018 and 2019 brought further changes to both the minimum qualifying period of...

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