A Castledine v HMRC

In A Castledine v HMRC [2016] UKFTT 145 (1 March 2016) the FTT found that deferred shares qualified as ordinary shares for the purpose of entrepreneur’s relief.

Mr Castledine claimed entrepreneur’s relief on the disposal of ordinary shares. The issued share capital of the company included deferred shares and if those were ‘counted’ as ordinary shares Mr Castledine’s holding represented 4.99% of the ordinary share capital so that he did not qualify for entrepreneur’s relief (ICGA 1992 s 169S and ITA 2007 s 989).

The FTT noted that the intention that the term ‘ordinary shares’ should be given a wide interpretation was emphasised by the words in parenthesis ‘however described’ (in s 989). The tribunal added that the creation of the class of deferred shares had been commercial; as a carefully devised means of protecting the company in the case of share-incentivised employees...