TechCos: Preserve ER with new tax election

26th September 2018

Those companies that continually go through funding rounds, such as your typical techco start-up, should be aware that HMRC are introducing a new tax election wef 6-Apr-19:

This election will allow shareholders who hold at least 5% of the company on 6 April 2019, and who are hence entitled to entrepreneurs relief (ER) should they exit at that time, to make a tax election to lock in this entitlement. This will be of value to shareholders who expect their shareholdings to dip below the 5% threshold in the future, due to the company making future share allotments that they do not participate in. Those potentially able to benefit from this now should ensure that they do not inadvertently dip below the 5% before the new legislation is introduced, as this could mean the difference between 10% and 20% capital gains tax rates when they eventually exit the company.

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