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Pre-existing agreement to confer voting rights on shares

16 October 2018
Issue: 4668 / Categories: Tax cases

D George (TC6678)

The taxpayer was a director of TRL. T was the chairman of the company and his family owned all its shares. In 2005 T offered the taxpayer the chance to acquire shares in the company which he took – becoming the owners of C and D non-voting shares. He was the only non-family member to own shares in it.

T wished to sell the company but because the taxpayer’s shares had no voting rights he would be unable to claim entrepreneurs’ relief for them. To rectify this T said he would enfranchise the taxpayer’s shares to confer voting rights. To allay any value shifting on the family members’ shares as a result the taxpayer agreed to cover any tax that arose on them.

The company was sold to S in August 2013. But because the shares were franchised only eight months earlier...

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