In Dieno George v HMRC [2018] TC6678 an employer's procrastination in changing its chief executive's non-voting shares into voting shares scuppered his claim for Entrepreneurs' Relief on disposal of the business. Equity could not prevail to alter the CGT rules.

  • In 2005 Mr George offered shares in Thornton & Ross Limited ("TRL"). This was the first time in a very considerable period that a non-family member had been offered the opportunity to become a shareholder in TRL. 
  • Mr George subscribed £999,996 for shares of 6.9% by nominal value of the company's ordinary share capital. They were non-voting shares on the advice of TRL's solicitors and accountants.
  • In 2012 it was planned to sell TRL and Mr George was advised that he did not qualify for CGT Entrepreneurs' Relief, as his shares did not carry any voting rights.
  • A new holding company type reoganisation was planned as part of the sale. Advisers said that "value shifting" tax charge might fall on the TRL shareholders as a result of Mr George acquiring voting shares. 
  • That sale did not go ahead and no changes were made to Mr George's shares. 
  • Talks continued to pursuade Mr George to stay on and assist in selling the company. 
  • The company was sold.
  • Mr George's shares still did not qualify for Entrepreneurs' Relief due to their lack of voting rights. He claimed ER on his self assessment return.
  • HMRC enquired into the return and issued a closure notice denying ER
  • Mr George appealed.

Mr George argued that one of the maxims of equity is that "equity looks on that as done which ought to be done", and equity treats a specifically enforceable contract to do a thing as if it were already done. He claimed that TRL's chairman Mr Thornton had intended to give rise to a legally binding contract between Mr George and Mr Thornton (acting for all the shareholders).

The FTT found that:

  • TRL's shares were held by a range of family members including trusts and whilst there was concern about the value shifting aspects there was a lack of impetus to make the changes and management were busy on other matters.
  • With so many shareholders, it could not be construed that Mr Thornton could make a legally binding agreement on behalf of all the shareholders.

In applying s169S(3)(b) to the facts in this case, even if Mr George was entitled to exercise voting rights (because of the application of the equitable maxim), it would not mean that those rights were exercisable by virtue of his holding of his shares. It followed that TRL would not be Mr George's personal company, and he is therefore not entitled to claim ER.


It always seems to be difficult for family owned companies to offer shares to third parties, whether that is good or bad for the company is a moot point. Interesting that someone was prepared to invest £1m in non-voting shares in such circumstances.

Very useful guides 

Issuing new shares (planning and pitfalls)

ABC or alphabet shares: directors and employees

Employment related securities: offering shares to a director or employee

Entrepreneurs' Relief

External links

Dieno George v HMRC [2018] TC6678

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