Q: I have shares in four different property development companies along with different mixes of business partners and family members. I claimed Entrepreneurs’ Relief a year ago when a similar company was wound up. Does this mean I cannot claim ER on a future winding-up of one or more of the companies?
A: You are referring to the Targeted Anti-Avoidance Rule (“TAAR”) which came into effect in April 2016 and which can in certain circumstances treat the proceeds of the winding-up as income rather than capital. In broad terms, the rules apply to individuals owning an interest of 5% or more in a close company and who have in the next two years an interest in or are involved in a business carrying on a similar trade or activity. On the face of it, you could be caught but there is a further condition to be met for the TAAR to apply which is there has to be an income tax avoidance motive.
If you can demonstrate the trading arrangements are dictated solely by commercial reasons then the TAAR ought not to apply although HMRC might be expected to take an interest.
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