Entrepreneurs’ relief and share options
Produced in partnership with Andrew Evans of Geldards LLP
Entrepreneurs’ relief and share options

The following Share Incentives guidance note Produced in partnership with Andrew Evans of Geldards LLP provides comprehensive and up to date legal information covering:

  • Entrepreneurs’ relief and share options
  • Background
  • Procedures
  • EMI schemes
  • Impact of exercise of options on existing shareholders
  • CSOP options
  • Unapproved options
  • SAYE option
  • SIP
  • ER Arrangements for MBOs

Background

Entrepreneurs’ relief (ER) is available for shares in trading companies provided the conditions in sections 169H–169SH Taxation of Chargeable Gains Act 1992 (TCGA 1992) are satisfied.

ER results in a capital gains tax (CGT) rate of 10% on lifetime chargeable gains of up to £10m measured on or after 6 April 2008.

In basic terms, an individual holding shares in a trading company qualifies for ER in relation to those shares if:

  1. the individual is an employee or an officer of the company (or a company within the group where the shares are held in the holding company)

  2. the company is a ‘personal company’ in relation to the individual, and

  3. both the employment condition and the shareholding condition are satisfied for the one-year period leading up to the date of disposal of the shares (extended to two years for disposals made on or after 6 April 2019)

A ‘personal company’ requires:

  1. a holding of at least 5% of the ordinary share capital of the company by nominal value, and

  2. a holding of at least 5% of the voting rights of the company, and

  3. either or both of the following conditions are met:

    1. by virtue of the Finance Act 2019 coming into force, in relation to disposals on or after 29 October 2018, a beneficial entitlement to at least 5% of the