Shares fail to meet voting rights condition

The taxpayer disposed of some ‘B’ ordinary shares. In his self-assessment tax return he claimed entrepreneurs’ relief on the gain. He stated in his return that in the articles of association the rights attached to the shares were incorrectly described but it was not possible to rectify the error. The articles provided that the holders of ‘B’ ordinary shares had no right to receive notice of attend or vote in general meetings. However the taxpayer claimed his ‘B’ shares had full voting rights.

HMRC denied entrepreneurs’ relief and the taxpayer appealed.

The First-tier Tribunal held that the ‘B’ shares did not have voting rights in a general meeting. This was clear from the articles. Article 4 ‘expressly prohibits ‘B’ shareholders from voting at … general meetings’. Article 5 permitted ‘B’ shareholders to consent in writing to or vote on an extraordinary resolution on any proposed modification which diluted...