HMT-HMRC Consultation outcome: Allowing Entrepreneurs’ Relief on gains made before dilution
Released 6 July 2018
HM Treasury and HMRC have published responses to the consultation on changes announced at Autumn Budget 2017 to the qualifying conditions of entrepreneurs’ relief.
On 13 March 2018, the Government published a consultation on the details of its proposal to allow individuals to elect to be treated as having disposed of and reacquired their shares immediately prior to a dilution event and to claim entrepreneurs’ relief (ER) on the gain up until that point. The proposal also included a second election to defer the gain, along with the opportunity to claim ER in its then-current form at the time of an actual disposal. The Government has decided not to make any major changes to the details of this change but (reflecting concerns raised in the consultation period) has taken steps to ensure that minority shareholders are not disadvantaged in comparison to non-minority shareholders, by allowing individuals to establish the valuation of their shares on the assumption of a whole company sale. Draft legislation has been published alongside this consultation response, to be included in the Finance Bill 2018-19.