Entrepreneurs Relief

Hi,

Can anyone tell me if Bonus issued share are back dated when claiming entrepreneurs relief? I have been told they are not back dated when claiming entrepreneurs relief. I can't find anywhere that says they are not back dated? If you have any links could you please post them. Any help is much appreciated, thanks

6.4 Replacement of original shares

The reorganisation of a company's share capital most commonly takes the form of a bonus or rights issue of shares or a reduction of capital, as a result of which the original shares are replaced by a new "holding" which may or may not include the original shares. The general rule is that mere exchange of one block of shares or securities for shares on the occasion of a company’s capital reorganisation is not to be taken as a disposal of the original shares or securities; instead, the new holding is treated as having been acquired at the same time as the original holding

Part 19-04-06 - Reorganisation or reduction of Share capital (S-584) (revenue.ie)

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From memory bonus shares are treated as being acquired on the same date as the original shareholding. Not sure that bonus shares is going to do for entrepreneur relief though.

MickFarr said:

I have been told they are not back dated when claiming entrepreneurs relief.

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Presumably it wasn't a punter that told you this.

Did they say why or on what basis? i.e. anti-avoidance etc.

dublin67 said:

From memory bonus shares are treated as being acquired on the same date as the original shareholding. Not sure that bonus shares is going to do for entrepreneur relief though.

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Yes this is correct I'm trying to find out why they are not when you claim ER?

AAAContributor said:

Presumably it wasn't a punter that told you this.

Did they say why or on what basis? i.e. anti-avoidance etc.

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No it was not a punter, this was a tax and advisory firm working for us on the tax and reorganization of the company prior to the sale. They said we would qualify for ER except on the percentage basis due to the bonus issue not being back dated when claiming ER. Yet on the very same call the head of the large law firm representing us in this acquisition said that it is only an opinion and not to write it off so quickly and that he would work with us after the sale to investigate further. I'm just can't find anywhere that states the shares are not back dated for ER?

MickFarr said:

They said we would qualify for ER except on the percentage basis due to the bonus issue not being back dated when claiming ER.

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Thanks. That helps narrow down the issue.

Was the bonus issue shares of a different class or did it carry different rights?

Is it possible to give more details on the capital structure of the organisation - shares in issue, when you acquired your holding and more details on the bonus issue?

AAAContributor said:

Thanks. That helps narrow down the issue.

Was the bonus issue shares of a different class or did it carry different rights?

Is it possible to give more details on the capital structure of the organisation - shares in issue, when you acquired your holding and more details on the bonus issue?

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I will get you more accurate info about the share type when I get home later,

I have owned 10% of the ordinary shares issued for the past 8 years, 200 in total and I owned 20. I get 10% of the equity value from the company sale. There was also 1,000,000 preference shares. Unfortunately these preference shares are classes as ordinary shares when claiming ER so that drops my percentage down drastically.

The company reorganization just before the sale issued 10 million ordinary bonus, I got 1,000,000 bonus shares. Everyone's percentage of ordinary shares issued stayed the same. So under this new reorganization I now qualify for the ER relief on the percentage ownership but they suddenly aren't back dated. They are back dated for CGT but not ER? Very confusing?

There is still hope as the tax team was mostly focused on the current company, reorganization and the new company share structure and future tax implications.

It's a huge chuck of tax to pay just because of not having the correct structure in place from the beginning, still keeping my fingers crossed.

Any advice good or bad is very welcome, thanks