Investors' relief rules relaxed
When you subscribe for shares in an unquoted trading company, investors’ relief can reduce the tax due on disposal of those shares to just 10%.
This relief was introduced on 16 March 2016, and it only applies to shares issued after that date. At first the relief excluded many investors, but the rules have now been relaxed.
You still need to be unconnected with the company at the time you subscribe for the shares, but you can become an employee of the company six months or more after that date. You mustn’t be offered a job with the company when you subscribe.
You are permitted to become an unpaid director of the company, and hence influence the running of the company, and you may be reimbursed any reasonable expenses you incur while performing your duties as a director.
However, you mustn’t extract value from the company other than as rent or interest paid on a commercial basis, so borrowing from the company is strictly prohibited.
Although the company must not be listed on a recognised stock exchange at the time you subscribe, it can become listed later. This means you can cash-in on an Initial Public Offering (IPO) made by the company, and pay only 10% tax on your gains if you have held the shares for at least a three year period which starts no earlier than 6 April 2016.
There are other complex conditions which may apply if the company is taken over at any point.