Divorce and personal company

A couple of years ago, I formed a company with my wife. We were both directors and held 50% of the shares each. Last year we split up; her shares were transferred to me and she also resigned as a director. The company ceased trading recently, and it will be wound up informally. Can I claim entrepreneurs' relief on the whole of the capital distribution paid to me on the winding up, or will just part of the distribution qualify because I only held 100% of the shares for a few months of trading?

1st April 2011

You qualify for entrepreneurs' relief on gains arising from all your shares, as you held at least 5% of the ordinary shares for 1 year up to the date the company ceased trading, and you were also a director throughout the last year of trading.

Therefore any shares you held in the company qualify for entrepreneurs' relief, and you will pay capital gains tax at an effective rate of 10% on the capital distribution (after deduction of your annual exemption of £10,100); rather than tax at 28% or 18%.

Preparing your tax return in the year of a divorce can be tricky, so if you would like any assistance please feel free to contact your local TaxAssist Accountant.

By Jo Nockels

Disclaimer: The information provided is based on current guidance (at date of publication) from HMRC and may be subject to change. Any advice shared here is intended to inform rather than advise. Taxpayer's circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this information, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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