The recent case of Russell Baker v HMRC TC02790 highlights the difficulties that arise where a company purchase of own shares does not meet the statutory requirements. It also highlights the importance of considering general legal principles in conjunction with the relevant tax rules. Case Summary The directors of the company fell out in 2005 in consequence of which the company undertook a company purchase of own shares in January 2006 to buy back the shares of one of the directors.  In return the director received total consideration of £120,000. HMRC raised an enquiry into the taxpayers 2005/06 tax return and concluded that the consideration of £120,000 was a distribution subject to income tax because the distribution did not m...

Overview of Entrepreneur's Relief Entrepreneur's relief is available on the disposal of qualifying business assets and shares and allows the taxpayer to claim a reduced rate of capital gains tax of just 10% (compared to 18/28% for basic/higher rate taxpayers). Since 6 April 2011 entrepreneur's relief has been available on up to £10 million of gains - this is a lifetime limit which applies per person. The relief is therefore very valuable and is often utilised by business owners. In order for the relief to be available a number of conditions must be met - the relevant conditions will depend on the type of asset being disposed of and who is disposing of the assets. Entrepreneur's relief can also apply to certain trusts such as the tr...