• At Kemp Little, we are known for our ability to serve the very particular needs of a large but diverse technology client base. Our hands-on industry know-how makes us a good fit with many of the world's biggest technology and digital media businesses, yet means we are equally relevant to companies with a technology bias, in sectors such as professional services, financial services, retail, travel and healthcare.
  • Kemp Little specialises in the technology and digital media sectors and provides a range of legal services that are crucial to fast-moving, innovative businesses.Our blend of sector awareness, technical excellence and responsiveness, means we are regularly ranked as a leading firm by directories such as Legal 500, Chambers and PLC Which Lawyer. Our practice areas cover a wide range of legal issues and advice.
  • Our Commercial Technology team has established itself as one of the strongest in the UK. We are ranked in Legal 500, Chambers & Partners and PLC Which Lawyer, with four of our partners recommended.
  • Our team provides practical and commercial advice founded on years of experience and technical know-how to technology and digital media companies that need to be alert to the rules and regulations of competition law.
  • Our Corporate Practice has a reputation for delivering sound legal advice, backed up with extensive industry experience and credentials, to get the best results from technology and digital media transactions.
  • In the fast-changing world of employment law our clients need practical, commercial and cost-effective advice. They get this from our team of employment law professionals.
  • Our team of leading IP advisors deliver cost-effective, strategic and commercial advice to ensure that your IP assets are protected and leveraged to add real value to your business.
  • Our litigation practice advises on all aspects of dispute resolution, with a particular focus on ownership, exploitation and infringement of intellectual property rights and commercial disputes in the technology sector.
  • We have an industry-leading reputation for our outsourcing expertise. Our professionals deliver credible legal advice to providers and acquirers of IT and business process outsourcing (BPO) services.
  • We work alongside companies, many with disruptive technologies, that seek funding, as well as with the venture capital firms, institutional investors and corporate ventures that want to invest in exciting business opportunities.
  • Our regulatory specialists work alongside Kemp Little’s corporate and commercial professionals to help meet their compliance obligations.
  • With a service that is commercial and responsive to our clients’ needs, you will find our tax advice easy to understand, cost-effective and geared towards maximising your tax benefits.
  • At Kemp Little, we advise clients in diverse sectors where technology is fundamental to the ongoing success of their businesses.They include companies that provide technology as a service and businesses where the use of technology is key to their business model, enabling them to bring their product or service to market.
  • We bring our commercial understanding of digital business models, our legal expertise and our reputation for delivering high quality, cost-effective services to this dynamic sector.
  • Acting for market leaders and market changers within the media industry, we combine in-depth knowledge of the structural technology that underpins content delivery and the impact of digitisation on the rights of producers and consumers.
  • We understand the risks facing this sector and work with our clients to conquer those challenges. Testimony to our success is the continued growth in our team of professionals and the clients we serve.
  • We advise at the forefront of the technological intersection between life sciences and healthcare. We advise leading technology and data analytics providers, healthcare institutions as well as manufacturers of medical devices, pharmaceuticals and biotechnological products.
  • For clients operating in the online sector, our teams are structured to meet their commercial, financing, M&A, competition and regulatory, employment and intellectual property legal needs.
  • Our focus on technology makes us especially well positioned to give advice on the legal aspects of digital marketing. We advise on high-profile, multi-channel, cross-border cases and on highly complex campaigns.
  • The mobile and telecoms sector is fast changing and hugely dependent on technology advances. We help mobile and wireless and fixed telecoms clients to tackle the legal challenges that this evolving sector presents.
  • Whether ERP, Linux or Windows; software or infrastructure as a service in the cloud, in a virtualised environment, or as a mobile or service-oriented architecture, we have the experience to resolve legal issues across the spectrum of commercial computer platforms.
  • Our clients trust us to apply our solutions and know-how to help them make the best use of technology in structuring deals, mitigating key risks to their businesses and in achieving their commercial objectives.
  • We have extensive experience of advising customers and suppliers in the retail sector on technology development, licensing and supply projects, and in advising on all aspects of procurement and online operations.
  • Our legal professionals work alongside social media providers and users in relation to the commercial, privacy, data, advertising, intellectual property, employment and corporate issues that arise in this dynamic sector.
  • Our years of working alongside diverse software clients have given us an in-depth understanding of the dynamics of the software marketplace, market practice and alternative negotiating strategies.
  • Working with direct providers of travel services, including aggregators, facilitators and suppliers of transport and technology, our team has developed a unique specialist knowledge of the sector
  • Your life as an entrepreneur is full of daily challenges as you seek to grow your business. One of the key strengths of our firm is that we understand these challenges.
  • Kemp Little is trusted by some of the world’s leading luxury brands and some of the most innovative e-commerce retailers changing the face of the industry.
  • HR Bytes is an exclusive, comprehensive, online service that will provide you with a wide range of practical, insightful and current employment law information. HR Bytes members get priority booking for events, key insight and a range of employment materials for free.
  • FlightDeck is our portal designed especially with start-up and emerging technology businesses in mind to help you get your business up and running in the right way. We provide a free pack of all the things no-one tells you and things they don’t give away to get you started.

Budget 2018 - Changes to Entrepreneurs' Relief and Degrouping Rules

Entrepreneurs’ Relief

Until the 2018 Budget, one of the key conditions for entrepreneurs' relief on a share sale was that, throughout a minimum holding period of at least one year before the sale, broadly, the shareholder holds at least 5% of the voting rights and 5% of the ordinary share capital of the company.

However, in the recent Budget, the Chancellor announced a change to these rules to extend the one-year period to two years.  This change comes into force for disposals on or after 6 April 2019 and so it may be worthwhile considering accelerating a potential sale in suitable circumstances.

In addition, another change was also made that takes effect for disposals on or after 29 October 2018 (the date of the Budget) and therefore it is already in effect assuming the legislation is enacted in its current draft form.  This change has caused a great deal of confusion and anxiety in the tax world.

In addition to the ordinary share capital and voting rights thresholds, it will now be necessary for the shareholder to have held an economic interest of at least 5% in the company throughout the minimum holding period.  To satisfy this condition, the draft legislation requires the shareholder to be beneficially entitled to at least a 5% interest in both:

  • the profits available for distribution to the 'equity holders' of the company; and
  • on a winding up, the assets of the company available for distribution to its 'equity holders'.

A company's equity holders include all of its ordinary shareholders but excludes holders of loan notes and ‘vanilla’ fixed rate preference shares.

The implications of this change are uncertain and potentially very extensive.

There could be many traps which entrepreneurs may fall into unwittingly because of this new test.

Shareholders in companies with instruments such as warrants, convertible loan notes or other debt securities with ‘equity-like’ characteristics may be treated as equity holders thus having an impact of the ability of the entrepreneur to attain the 5% threshold.

Traps may also exist for entrepreneurs holding growth shares that participate only in the future growth of the company or only participate once a hurdle has been reached.  Managers’ sweet equity shares will usually represent less than a 5% economic interest in the company and, accordingly, such managers will also no longer be able to claim the relief.

It would also appear as though alphabet shares may not allow entrepreneurs’ relief to be claimed by the shareholder, as the shareholder would only benefit from a dividend if the directors declared a dividend on that class of shares.  Therefore there would be no beneficial entitlement.  

There has been a bit of an outcry about this change and there has been much lobbying going on to change the wording before the Finance Bill is enacted early next year.  We await further news on this.  In the meantime, if anyone is expecting to be in a position to claim entrepreneurs’ relief on a disposal of their shares, we would recommend that the position is reviewed in case the above changes have an impact on this.

Degrouping Rules

The Chancellor also announced the intention to reform the intangible assets regime to prevent a de-grouping charge arising on a share sale qualifying for the substantial shareholdings exemption (SSE).  This is a very welcome announcement.

The intangible assets regime was introduced in 2002 and sets out how companies are taxed in relation to IP and goodwill created or acquired from an unrelated party on or after 1 April 2002.  Where an asset within this regime is transferred from one group member to another, the transfer will be treated as tax-neutral.  However, where the transferee company ceases to be a member of the group within six years of a tax-neutral intra group transfer, the transferee company is deemed to dispose and reacquire that asset, which can give rise to a tax charge (called a de-grouping charge).

This de-grouping charge can cause difficulties where the sale of a business by a company is structured as a hive-down to a new subsidiary followed by a sale of that subsidiary.

Under the current rules if the IP is not within the new regime (perhaps because it was created before 2002) and the shares are sold, the de-grouping charge can be eliminated if the sale falls within the SSE.  However, if the IP is within the new regime, the de-grouping charge remains.  This differential has now been removed and this will make it simpler for companies to undertake various reorganisations that previously would have required a detailed analysis of whether or not the intangible assets regime applies.  

The changes introduced by the Budget have effect for de-grouping events occurring on or after 7 November 2018 and so are already in effect (assuming the draft legislation is enacted in its current form).

Contact our experts for further advice

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