Too soon to say goodbye

KEY POINTS

• Timing departure as an employee or director when selling shares in the company.
• What constitutes continuing employment duties?
• The impact of the new reduced 20% rate of capital gains tax.
• Importance of tax planning before completing transactions.

The conditions to qualify for capital gains tax entrepreneurs’ relief are onerous. It is a condition that when there is a disposal of shares the vendor must be a director or employee throughout the year leading to the disposal. In reality many directors leave in haste and then sell their shares by some form of ‘post-departure agreement for sale’. Many would argue that from a practical point remaining as a director provides an improved position of strength for negotiation as well as tax relief.

The First-tier Tribunal decision in J Moore (TC4903) shows the...