In Richard Hurst v HMRC [2014] TC0403 a taxpayer successfully claimed that he was a "disguised" employee in order to claim CGT Entrepreneurs' Relief. His claim to be a de facto director failed.

One of the qualifying conditions in making a claim for CGT Entrepreneurs' relief (ER) on a material disposal of business assets within s 169I is whether the shareholder is an officer or employee of the company at the relevant times.

The taxpayer disposed of his shares in a company two years following, his resignation as a director as a result of a criminal conviction. He continued to work for the company on commission but not under an employment contrat.

He claimed ER on the basis that he was a de facto director of the company and if not then he was an employee, based on employement status case law.

The tribunal noted that there are three times in which the law recognises a person as a director:

  • De jure – in law, where he is formally appointed under the Companies Acts
  • De facto – in fact, where he assumes the responsibility to act as a director and both company and third parties considered him to be a director
  • Shadow – someone “who lurks in the shadows” who does not claim to purport to act as a director but is a person in accordance with whose directions or instructions the company are accustomed to act.

It found that he was not a director of the company.

In terms of whether he was an employee, the tribunal applied the conventional tests for employment status in considering whether he was engaged under a contract of service, finding primarily that:

  • he worked under the control of the company
  • he was also paid a commission for his work
  • he was provided with equipment including a phone line, internet and laptop.

The tribunal concluded that he was an employee and his claim for CGT ER succeeded.


These cases are like buses! Two in one year. In Susan Corbett v HMRC [2014] TC 03435 a wife, who had apparently resigned from her husband’s business was still treated as an employee. She continued in the same role although her salary was paid to her husband instead. The tribunal accepted her claim for ER on the basis that she was an employee.

The downside for the employers is that HMRC will presumably now be chasing for unpaid NICs.


See CGT Entrepreneurs' relief (ER) 

Richard Hurst v HMRC [2014] TC04038 

Susan Corbett v HMRC [2014] TC 03435