Entrepreneur Relief Tax

RemedyCiata

Hi there,

I'm involved in an exit from a business due to internal differences between me & the one other director/shareholder. His offered 325 k sum to buy me out using a company buy back of my shares.

I've of course consulted with an Accountant, who outlined the conditions for Entrepreneur Relief Tax, which I believe I meet, bar a question mark over one condition.

To receive this relief, I'm not to be connected with the company after purchase. That's fine I've no intention of being involved with it. However I do hope to set up my own company, which will be very similar to the one I'm leaving. It'll essentially be competing with the business I'm existing.

The accountant was a little hesitant on this and from reading through material on it, there doesn't seem to be a definite conclusion. I mean if I was purposely liquidating the company -applying Entrepreneur Relief and then starting afresh, I can see how that would fall foul, but that's not the case here as the business I'm selling my shares from will continue under the sole ownership of the other shareholder / director.

Also, in my scenario would I have been better off approaching a tax consultant rather than an accountant on these matters?

Will Yam

RemedyCiata wrote: »

Hi there,

I'm involved in an exit from a business due to internal differences between me & the one other director/shareholder. His offered 325 k sum to buy me out using a company buy back of my shares.

I've of course consulted with an Accountant, who outlined the conditions for Entrepreneur Relief Tax, which I believe I meet, bar a question mark over one condition.

To receive this relief, I'm not to be connected with the company after purchase. That's fine I've no intention of being involved with it. However I do hope to set up my own company, which will be very similar to the one I'm leaving. It'll essentially be competing with the business I'm existing.

The accountant was a little hesitant on this and from reading through material on it, there doesn't seem to be a definite conclusion. I mean if I was purposely liquidating the company -applying Entrepreneur Relief and then starting afresh, I can see how that would fall foul, but that's not the case here as the business I'm selling my shares from will continue under the sole ownership of the other shareholder / director.

Also, in my scenario would I have been better off approaching a tax consultant rather than an accountant on these matters?

My understanding (and it may not be complete) is that you should be ok.

You are getting out of one business and going into another. Your reason for getting out is bona fide - shareholder difference.

Will Yam

RemedyCiata wrote: »

Hi there,

I'm involved in an exit from a business due to internal differences between me & the one other director/shareholder. His offered 325 k sum to buy me out using a company buy back of my shares.

I've of course consulted with an Accountant, who outlined the conditions for Entrepreneur Relief Tax, which I believe I meet, bar a question mark over one condition.

To receive this relief, I'm not to be connected with the company after purchase. That's fine I've no intention of being involved with it. However I do hope to set up my own company, which will be very similar to the one I'm leaving. It'll essentially be competing with the business I'm existing.

The accountant was a little hesitant on this and from reading through material on it, there doesn't seem to be a definite conclusion. I mean if I was purposely liquidating the company -applying Entrepreneur Relief and then starting afresh, I can see how that would fall foul, but that's not the case here as the business I'm selling my shares from will continue under the sole ownership of the other shareholder / director.

Also, in my scenario would I have been better off approaching a tax consultant rather than an accountant on these matters?

And yes, a tax specialist might be better than an accountant for what’s at stake.

Aisling(",)

I assume you are referring to Revised Entrepreneurial relief which is covered in legislation in S.597AA.

From my reading of your post I would also think you're fine to avail of the relief.

More detail on the relief is available in this TDM.
https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-19/19-06-02b.pdf

I would recommend you get the help of a tax advisor however you could submit the information to Revenue via MyAccount asking if setting up a competing business would have any impact on availing of the relied.

DmanDmythDledge

You also need to ensure the buyback will be treated as capital and distribution. Sounds like it probably would be but you'd need professional advice to confirm.