5% qualification for entrepreneurs’ relief

Key points

• The underlying purpose of entrepreneurs’ relief?
• The 5% ordinary share capital requirement.
• The taxpayer had more than 5% of the voting rights but the value of the holding was below that percentage.
• When interpreting the requirements of TCGA 1992 s 169S the tribunal relied on the Canada Safeway case.
• The taxpayer’s argument that a purposive multi-factorial approach should be taken was rejected.

If there was a tax relief designed to apply a reduced rate of capital gains tax to the gains of those with entrepreneurial inclinations who took commercial risks by investing in businesses I cannot imagine that Philip Hunt would not be one of the beneficiaries. Alas the primary relief available in such circumstances is entrepreneurs’ relief and Mr Hunt fell outside the rules; as a result he had to pay almost £200 000 more capital gains tax than he had hoped.

At first blush rather...