ICAEW Tax Rep 49/18: Allowing enterpreneurs’ relief on gains before dilution

Released 15 May 2018

The ICAEW has commented that it does not think the proposal by HMRC and HM Treasury for allowing entrepreneurs’ relief on gains before dilution is viable.

The Institute of Chartered Accountants in England and Wales (ICAEW) has published its response to the consultation on allowing entrepreneurs’ relief on gains before dilution published by HM Treasury and HMRC in March 2018. The ICAEW has expressed concerns that the proposal may not deliver the stated policy objective of ensuring that “entrepreneurs are not discouraged from seeking external investment to finance business growth in circumstances where their own shareholding becomes diluted.” and appears to only ‘lock in’ entrepreneurs’ relief on the minority discount value of the shares when in reality any exit event is likely to mean the entrepreneur receives full value. The ICAEW is also concerned that the proposal appears complex involving elections, claims and share valuations and in some cases, professional fees may wipe out any tax benefit.

View ICAEW Rep 49/18.

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