In Philip Hunt v HMRC [2018] TC02528, the First Tier Tribunal (FTT) decided that the Entrepreneurs’ Relief test for a percentage holding in a company’s ‘ordinary share capital’ should be measured by nominal value rather than the number of shares in issue.

Condition A for Capital Gains Tax (CGT) Entrepreneurs’ Relief on a share disposal asks whether your company was your personal company. One of the tests asks whether you held least 5% of the ordinary share capital and 5% of voting power.

  • Mr Hunt held E and B shares of differing nominal value in Foviance Group Ltd.
  • The company was sold and he claimed ER.
  • HMRC challenged his claim and raised a CGT assessment for £199,751

Mr Hunt’s holdings


No of shares

Nominal value per share

Issued share capital

E shares




B shares




Mr Hunt’s total holding




Total issued by company




% of company




% of votes




Mr Hunt claimed that the Tribunal should take a purposive, multi-factorial approach to determine whether a person owed 5% of the company from an overall economic point of view, and in carrying out that exercise, should take into account rights to vote, rights to receive dividends, and rights to receive capital on a winding up. 

Tribunal found that:

  • For ER, “ordinary share capital” means all the company's issued share capital (however described), other than capital the holders of which have a right to a dividend at a fixed rate but have no other right to share in the company's profits.
  • The term ‘issued share capital’ had been considered by McGarry J in Canada Safeway v IRC [1972] 1 All ER 666: the test of nominal value is simple, workable and, above all, related to the words ‘share capital

Judge Redstone agreed with the Canada Safeway decision and she concluded that 5% of a company’s 'issued share capital' means “5% of the total nominal value of a company’s share capital”. The appeal was dismissed.


The qualifying conditions for Entrepreneurs’ Relief continue to evolve. Finance Act 2019 adds a new test which considers entitlement to sales proceeds and capital. It is always worth checking which rules apply for the relevant tax year.

Our practical tax guides

Entrepreneurs' Relief: start here
What types of disposal may qualify for relief

Entrepreneurs' Relief
Disposal of shares in a personal company and tracker of all the recent changes to the rules.

What is an Ordinary Share?
It is essential to know whether a share is 'ordinary' as this sets the qualifying conditions for numerous tax reliefs ranging from income tax share loss relief, SEIS, EIS, CGT Entrepreneurs' Relief and Investor Relief to corporation tax etc.

External links

Philip Hunt v HMRC [2018] TC02528


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