These measures were widely criticised for being unclear. Not least, they were problematic for holders of so called "Alphabet Shares", which only carry a discretionary right to a dividend rather than a specific "entitlement".Similarly, holders of "Growth" shares, which sacrifice dividends in favour of an expectation of capital appreciation, were also unlikely to qualify for more lenient tax treatment.
The announcement led to widespread concern that a large number of shareholders would suffer as a result, and although the Chancellor believed that only around 1,000 companies would be affected by the change, independent estimates place the figure considerably higher.
Thankfully an amendment to the Bill was tabled late in December. It removes the strict requirement for an entitlement to at least 5% of the distributable profits and assets available for distribution. In its place is a new twin test, which would be met if the previous test was met, or alternatively in the event of a disposal of the whole of the ordinary share capital of the company the individual would be entitled to at least 5% of the proceeds.
Revised guidance is expected from HMRC in due course, but the amendment makes it clear that the sale requirement will be tested as at the date of actual sale based on either real sale proceeds or by applying a notional split of proceeds based on market value.