Personal company: voting rights

HMRC's view of voting rights is set out at CG64050  as follows

Where two or more persons hold shares jointly each person is to be treated as holding the appropriate proportion of the total holding and associated voting power. For example, where a husband and wife or civil partners own a joint 100% shareholding equally they are treated as each holding 50% of the shares and 50% of the voting power.

Note however that shares held, or voting rights which an individual may be able to exercise, as a trustee of a settlement CANNOT be counted towards the individual’s 5% total. And a qualifying beneficiary of a settlement cannot include shares (and voting rights) held in the settlement in determining whether he or she holds the 5% necessary for the company to be his or her personal company.

Any voting rights which come into force only in certain circumstances are not `exercisable' while those circumstances do not exist. For example, preference shares in a company may entitle the shareholder to a vote only if the dividend on these shares was six months in arrear at the date of the company's annual general meeting. Such votes would not be exercisable if the preference dividend never fell into six months' arrear.

But the Retirement Relief case of Hepworth v Smith (54TC396) makes it clear that it is not necessary for voting rights actually to be exercised for them to be exercisable. Vinelott J said what one has to look at is the factual question whether voting rights exercisable in general meeting are or are not exercisable by the individual claiming relief.