Mr Smith is a shareholder and director of a company which is due to be sold. Some of his shares have been owned for many years and qualify for entrepreneurs’ relief (ER) but a large proportion were acquired only a few months ago. If the shares are “pooled” much of the capital gain will be attributable to the later shares. Is there anything which can be done to avoid the loss of ER?
The qualification conditions for ER are considered by reference to the company whose shares are being sold and not to the shares themselves being sold. You have determined that ER is available because the conditions were met before the later acquisition of shares and continued to be met. The later shares do not have to be owned for twelve months. It is only necessary that the company was your client’s “personal company” throughout the twelve months preceding the disposal so the share-pooling rules do not prevent ER from being available against the whole of the capital gain.