The saga of entrepreneurs’ relief and joint ventures has finally been tidied up one year after it began. Those of you who care about these things will remember that ER was available where a holding company held between 10% and 50% of an underlying trading company, which qualified as a joint venture company (five or fewer shareholders held at least 75%). However, access to ER was denied almost overnight as the joint venture rule was just deleted.

The offence that HMRC was apparently looking to attack was a structure favoured in private equity which allowed company management to access ER even though they held less than the basic 5% of shares and votes required – and this was done using the JV rules. Instead of authoring a well thought through amendment to ER that looked for an ‘effective’ 5% directly or indirectly HM Treasury instead opted for the ‘blunderbuss’ strategy.

After a lot of pressure from the professional bodies HMRC and HM Treasury, understanding the point and probably having the transaction in securities rules in their sights began a steady but slow climb down which culminated in a change announced in Budget 2016 which looks for that effective 5% directly or indirectly. Of further comfort is that this change will be backdated to 2015.

Whilst this will be a welcome development for many who were concerned, it is almost certain that most are now more worried about the proposed changes to the Transactions in Securities rules, which are scheduled to take effect on 6 April 2016, and at the time of writing I can see no new guidance or commentary in the Budget documents on that matter, and so now await the publication of the Finance Bill next Thursday.

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