42 taxation


Investors’ Relief – a new route to 10% tax


The March Budget had plenty of good news for businesses and entrepreneurs, and reforms that the chancellor claimed are designed to ‘put the next generation first’, writes tax director Holly Bedford-Bell


The 2016 Budget included the surprise announcement of a new Investors’ Relief giving a 10% tax rate on share disposals. Although this was described as an extension to Entrepreneurs’ Relief (ER), it is in reality opposite to ER in many ways with the main similarity being a 10% tax rate on the first £10 million of gains. Investors’ Relief is in addition to ER so you can have £10m of lifetime gains under ER and £10m of lifetime gains under Investors’ Relief.


The main conditions to achieve this relief are:


• The investor subscribes for the shares on or after March 17, 2016;


• The shares are ordinary shares;


• The shares were unlisted when acquired;


• The company is a trading company or holding company of a trading group;


• The shares are held for at least three years; and


• The investor is not an employee or officer of the company while they hold the shares. This also covers people connected with the investor.


This relief is welcome, however the background to its introduction is interesting.


ER has been with us for some years now and has become the tax goal for business owners. Most entrepreneurs are well versed in what they need to achieve the 10% tax rate. For shareholders the usual rules are that, for 12 months leading up to a disposal, they hold 5% of


deals update ... continued MBO of Dalepak


Completion Date: 18/04/16 Target: Dalepak


Acquirer: Management team led by Sovereign Capital Deal Value: Undisclosed


Details: HMT LLP, led by partner Andrew Thomson, director Peter Wear and manager Antonia Fernandez undertook financial due diligence of Northampton-based logistics group Dalepak in respect of the MBO funded by Sovereign Capital Partners and Crescent Capital


Funding: Sovereign Capital Partners, Crescent Capital and RBS Legal Advisers: Eversheds Financial Due Diligence: HMT Commercial Due Diligence: Apex Insight


Mantransco


Completion Date: 18/03/16 Target: Mantransco Acquirer: Ardula Deal Value: Undisclosed


Details: WK Corporate Finance has advised the sellers of Mantransco, a specialist brick and block haulier, to Ardula, a sand, gravel, topsoil and muck away waste disposal business


Corporate Finance Advisers: Rob Holmes and Louis Nutland of WK Corporate Finance


Legal Advisers: Richard Atcherley and Anna Robinson of Paris Smith


www.businessmag.co.uk


Completion Date: 04/16 Target: Blis Media Acquirer: Unilever Ventures, Endeit, Beringea Deal Value: $25 million


Details: Meridian investee company Blis completed a $25m international PE fundraise through Unilever Ventures and Endeit to continue its market leading growth. Blis, a provider of leading behavioural and location based advertising tools is now able to look ahead and continue to expand the company from its current position of eight offices around the globe


Legal Advisers: Fox Williams LLP; Shoosmiths LLP Investment in Orchid


Completion Date: 04/04/16 Target: PC Cox Group Acquirer: Sulzer (UK) Holdings Deal Value: Undisclosed


Details: Henmans Freeth advised the shareholders on the sale of PC Cox, a leading manufacturer of handheld sealant and adhesive dispensers for industrial applications, to Sulzer strengthening Sulzer’s position as a leading solution provider in the area of mixing, dosing and application systems


Legal Advisers: Henmans Freeth (Leon Arnold and Malin Svanberg Larsson – corporate; Claire Boyce – tax; Laura Hodgson – property) for the shareholders and DLA Piper UK LLP for the acquirer


Blis Media


the voting rights and ordinary share capital and are employees and officers of a trading company or group. In addition, EMI share option holders can achieve ER for smaller shareholdings since 2013.


The detailed ER rules were being utilised to achieve a 10% tax for people who were perhaps not the original target of the legislation through complicated “Manco” structures. These enabled less than 5% shareholders who were not employees of the underlying group to achieve ER. This often benefited the private equity industry whose low tax rates caused much negative comment. In December 2015, HMRC announced changes to the detailed ER rules that prevented these Manco structures, so removing the 10% rate from such investors.


It is therefore surprising perhaps to now see a relief being introduced that provides such investors with a much simpler route to achieve a 10% tax rate. There is no need for complicated Manco structures when you have the new Investors’ Relief. The three-year holding period fits well with the usual private-equity ownership period.


Acquisition of Centric Systems


Completion Date: 15/04/16 Target: Centric Systems Acquirer: Equity Networks Deal Value: Undisclosed


Details: HMT LLP led by partner Mark Lucas and associate director Jez Quigg advised the shareholders of Centric Systems on the disposal of the business to Equity Networks


Legal Advisers: Lamb Brooks Corporate Finance Advisers: HMT


The Mulberry House School secure finance


Completion Date: 03/03/16 Deal Value: Undisclosed


Details: RSM UK's lead advisory team assisted The Mulberry House School to negotiate funding for a major building project to significantly increase the size of the school


Funding: Lloyds


Financial Due Diligence: RSM: Ian Wherry, partner; Mark Colling, associate director; Arvin Feltham, executive


Next Deadline The next Deals Update will be in our June issue


Deadline for submissions is Monday May 9 To submit deal information or to advertise on this page contact:


Steve Banbury • 0118-9766414 • steve@elcot.co.uk Elcot Publications is not responsible for the accuracy of information in the Deals Update section which is supplied by individual firms


THE BUSINESS MAGAZINE – THAMES VALLEY – MAY 2016


Although this new relief will benefit many investors and encourage investment in unlisted companies, the tax landscape for company shareholders is now even more of a patchwork that does not always make sense. For example, why should employees or directors holding less than 5% of the shares be taxed at full capital gains tax rates when an external investor can qualify for a reduced 10% tax rate?


The tax team at HMT led by Holly Bedford provides specialist advice to shareholders, management and companies on acquisitions, disposals and corporate restructurings.


Details: Holly Bedford-Bell hbedford-bell@hmtllp.com 01491-579740 www.hmtllp.com


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