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Deferred Shares Were ‘Ordinary Shares’ For Relief Purposes

By Mark McLaughlin, June 2016
Summary

Deferred shares were ‘ordinary shares’, which had to be taken into account such that the taxpayer held less than the required 5% of the company’s ordinary share capital for entrepreneurs’ relief purposes (i.e. the ‘personal company’ definition in TCGA 1992, s 169S(3)).

Background

The appellant owned a number of ‘A’, ‘B’ and preference shares in a company, together with loan notes. He disposed of loan notes during the tax years 2011/12 and 2012/13, and claimed capital gains tax entrepreneurs’ relief (ER) in respect of the disposals.

The company’s share capital included deferred shares, which had no voting rights and no right to dividends; their sole value was in the right to be redeemed at par on a capital realisation after at least £1 million had been distributed in respect of each
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