Mark McLaughlin highlights a case where imprecision in a share transaction nearly cost a taxpayer the loss of tax relief.
Most trading company owners wishing to claim capital gains tax (CGT) business asset disposal relief (BADR) on an eventual sale of their shares need to satisfy certain conditions throughout a two-year period ending with the disposal.
The 5% tests
One of those conditions is that the company is the individual’s ‘personal company’ (TCGA 1992, s 169S(3)). This broadly means that:
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the individual holds at least 5% of the company’s ordinary share capital;
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that holding gives at least 5% of voting rights in the company; and
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it also gives beneficial entitlement to at least 5% of distributable profits and at
