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The shareholder directors of a limited company own shareholder loans. These were acquired at a low price from a previous and unconnected shareholder when there seemed little likelihood of repayment
In relation to claims for capital gains tax entrepreneurs’ relief we are aware that the definition of a “business asset” includes not just a qualifying company’s shares but also its securities.
We are however having difficulty understanding whether the definition of a “security” – provided by TCGA 1992 s 169S(5) which leads one into TCGA 1992 s 251(6) – would apply to the situation we have. Certain shareholder directors in an otherwise qualifying company for entrepreneurs’ relief purposes also hold shareholder loans.
These shareholder loans were acquired some time ago from a former unconnected shareholder for a nominal consideration because it was not expected that the loans would ever be repaid. An unexpected profit realised from the sale of a trading asset has now given the company cash with which to repay the shareholder loans.
It is accepted that any...
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