Undiluted Taper

Peter Rayney Tax Partner with BDO Stoy Hayward illustrates some vagaries of taper relief planning.
Many passive (i.e. non-working) shareholders are likely to suffer a dilution in their overall taper relief as a result of the period between 6 April 1998 and 5 April 2000 counting as a 'non-business' period for taper relief purposes. The gain on their eventual disposal would be apportioned between this 'non-business' period and the post-5 April 2000 period which will invariably qualify as a 'business' period under the extended Finance Act 2000 business asset definition. A working shareholder holding less than 5 per cent of the voting rights would also suffer from the same problem. Pre 1998 shareholders would have to wait twelve years before the non-business period is completely disregarded for tapering purposes.
A 'tainted' shareholder may improve his taper position by transferring the shares for example into an...