The new measure provides for a reduced 10% Capital Gains Tax rate on gains accruing on the disposal of qualifying shares in an unlisted company. When the measure was initially introduced, there was a requirement that the investor cannot be classified as a ‘relevant employee’ in order for the relief to be available.
According to HMRC, a ‘relevant employee’ is classified as any person who has been an officer or employee of the company (or of a connected company) in the period from the issue through to the disposal of shares in question. This extends to any connected persons of the individual (i.e. spouse, civil partner, brothers, sisters, ancestors or lineal descendants).
However, the rules have been amended as follows:
- the investor can become an unpaid director of the company (provided that the investor had no connection with the company prior to making the investment); and
- the investor can become an employee once 180 days have passed from the time that the shares are subscribed for (provided that there was no reasonable prospect of the investor becoming an employee of the company at the time of making the investment).
The above amends represent considerable changes to the measure, and there may be further amends as the Bill passes through Parliament.
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