About Peter Rayney

Peter Rayney practices as an independent tax consultant. His main specialisms are corporate tax, company reorganisations, corporate finance tax (including company sales and acquisitions) and all aspects of owner managed business taxation. Peter worked at BDO LLP for nearly 20 years, acting most recently as their National Tax Technical Partner. He is a widely-recognised tax author and lecturer and regularly contributes to the professional press. He won Taxation's 'Tax Writer of the Year' award in 2002 and was shortlisted for the award in 2008, 2009, and 2011. Also, in 1994, Peter won the Chartered Institute of Taxation Fellowship Thesis prize for his thesis on "Selling companies for a deferred consideration (with particular reference to earn-outs)". Peter currently chairs the ICAEW Tax Faculty's SME Business Tax Committee.

Be aware of the 5% ER shareholding trap(s)

Posted on January 13, 2012 by Peter Rayney

Over the last year or so, I have come across a few situations where owner-managers have unwittingly invalidated their qualifying entrepreneurs’ relief (ER) status by failing to appreciate the precise requirements of the 5% shareholding test, which has created all sorts of problems on the sale of their company.

Section 169I, Taxation of Chargeable Gains Act 1992 (TCGA 1992) requires the seller to hold at least both:

• at least 5% of the ordinary shares (which is measured in terms of their ‘nominal value’) and
• at least 5% of the voting rights.

There are no ‘associate’ rules here, so the 5% must be held by the shareholder in their own right.

In one particular case, the two main director shareholders had issued 10,000 10p variable rate preference shares to a number of key employees. They failed to indentify that the ‘preference shares’ – which carried variable dividend rights – would be classified as ordinary shares for the purposes of the ER rules. (All shares are ordinary shares except fixed rate preference shares – see s 989, ITA 2007 (s 169S, TCGA 1992)). The fact that they each continued to hold 50% of the voting power was insufficient by itself.

It would have been possible to correct the situation for the future, for example, by arranging for an appropriate bonus issue of ordinary shares to the director-shareholders. However, they suddenly received an unexpected £8m offer for the purchase of ‘their’ company. As things stood, they could not sell their shares with the benefit of ER!

In real life this ER problem was fortunately resolved with the acquiescence of the purchaser . However, the purchaser wanted to book the acquisition ‘Day 1’ so it was not possible to use ‘put and call’ options. Instead, the purchaser created a ‘bid-company’ (Bidco) which was also structured to be the ‘seller’ director-shareholders’ ‘personal company’ for ER purposes. They then took their sale consideration in the form of non-qualifying corporate bonds issued by Bidco so they had to wait another 12 months for their money!

Sometimes, purchasers will not be willing to complicate their acquistion. Owner managers must fully fully understand the wider ER implications of issuing shares to employees and venture capitalists!

Split year non-residence concession ESC A11 and s811 ITA 2007

Posted on December 30, 2011 by Peter Rayney

Many tax advisers will be familiar with the ‘split-year’ residence treatment offered by ESC A11. This will include cases where an individual leaves the UK to work under a full-time employment contract abroad (spanning at least one UK tax year). A word of warning as some have not looked at the small print of the concession. It does not affect the UK tax treatment of dividends paid after someones leaves for the purposes of a long term employment contract abroad. ESC A11 specifically says that the concession does not apply to for the purposes of s811 ITA 2007 which applies to limit UK tax on UK dividends etc received by a non-residence. This only applies for complete UK tax years and is not therefore subject to the ESC a11 split year treatment. This can have an important impact on the timing of UK dividend payments after someones goes abroad and claims non-resident status for the remaining part of the UK tax year of departure. Overseas tax and treaty relief also needs to be factored in.

Tax Planning for Family & Owner Managed Companies (TPFOMC) – 2011/12

Posted on December 22, 2011 by Peter Rayney

I am happy to announce that the 2011-12 edition of TPFOMC, published by Bloomsbury Professional, has just been published and now available from the publishers, Amazon and all other good book stores.

Live to the world!

Posted on December 17, 2011 by Peter Rayney

Welcome to my new website and blog which goes live today!

I practice as an independent tax consultant. My main specialisms are corporate tax, company reorganisations, corporate finance tax (including company sales and acquisitions) and all aspects of owner managed business taxation.

I’ve worked at BDO LLP for nearly 20 years, acting most recently as their National Tax Technical Partner.

I am widely-recognised as a tax author and lecturer and I regularly contribute to the professional press. I won Taxation’s ‘Tax Writer of the Year’ award in 2002 and was shortlisted for the award in 2008, 2009, and 2011. Also, in 1994, I won the Chartered Institute of Taxation Fellowship Thesis prize for my thesis on “Selling companies for a deferred consideration (with particular reference to earn-outs)”.

I currently chair the ICAEW Tax Faculty’s SME Business Tax Committee.

I will be blogging here regularly so please check back anytime for news.

Peter Rayney

Thanks
Peter