CIOT consultation response: Allowing Entrepreneurs’ Relief on gains made before dilution

Released 11 May 2018

CIOT supports proposed measure to preserve entrepreneurs’ relief on pre-dilution gains but has concerns over practicalities.

The Chartered Institute of Taxation (CIOT) has published its comments submitted to HMRC in response to the consultation: Financing growth in innovative firms: allowing Entrepreneurs’ Relief on gains before dilution. The consultation focuses on the mechanism to preserve Entrepreneurs’ Relief (ER) for gains arising to individuals who no longer hold a qualifying 5% interest in a company as a consequence of the issue of new shares to raise capital for the purposes of its trade. The extension to the relief will apply to dilutions occurring as a result of fundraising issues on or after 6 April 2019. The CIOT considers that in principle the preservation of ER via an elective disposal and holdover will help to remove the potential barrier to growth within the limitations imposed by the commercial capital raising condition. However, the CIOT considers there are significant practical concerns (cost of valuation and valuation bases) and some further uncertainties arising from the consultation document that require clarification or consideration.

View the submission Allowing Entrepreneurs’ Relief on gains made before dilution - CIOT response.

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