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Where Taxpayers and Advisers Meet

Entrepreneurs Relief query on associated disposal post 5/4/2008

cde123
Posts:3
Joined:Wed Jun 03, 2015 8:25 am
Entrepreneurs Relief query on associated disposal post 5/4/2008

Postby cde123 » Wed Jun 03, 2015 8:40 am

Hello, I am trying to work out what proportion of a capital gain qualifies for ER at 10% on the sale of a shop used in a business. The shop is owned by the director and has been used by the director's own personal trading company for 20 years since it was purchased. A full market rate of rent has been paid every year. The director is now selling the business and the shop to the purchaser.

Am I correct in thinking that ER at 10% on the gain qualifies only for the period to 5/4/2008 but the latter period to date of sale would be taxed at 28% as they are already a higher rate taxpayer?

Thank you for any help

pawncob
Posts:4609
Joined:Wed Aug 06, 2008 4:06 pm
Location:West Sussex

Re: Entrepreneurs Relief query on associated disposal post 5/4/2008

Postby pawncob » Wed Jun 03, 2015 10:32 am

Please read:
https://www.gov.uk/entrepreneurs-relief

to check if ER is available.

ER applies to the whole gain.

http://www.hmrc.gov.uk/manuals/cgmanual/CG64130.htm
With a pinch of salt take what I say, but don't exceed your RDA

taxmenot
Posts:8
Joined:Wed Jun 03, 2015 1:54 pm

Re: Entrepreneurs Relief query on associated disposal post 5/4/2008

Postby taxmenot » Thu Jun 04, 2015 11:00 am

Hi,

I think the title is a misleading as "associated disposal" does not apply to sole traders which I assume is the case here.

But as the last post suggested, ER will be available as all the assets (shares and business assets) are being disposed of. Disposal of a single asset used in that business will not qualify for ER.

The sections you are looking at are TCGA 1992, s.169I onwards.

Hope that helps

Kr

LozaACCS
Posts:1504
Joined:Wed Aug 06, 2008 3:55 pm

Re: Entrepreneurs Relief query on associated disposal post 5/4/2008

Postby LozaACCS » Thu Jun 04, 2015 9:05 pm

The OP does not appear to me to be a sole trader, my interpretation is as follows.
The OP carries out his trade through his PSC.
He owns the shop personally but it is used in the companies trade, the disposal would therefore be an associated disposal assuming the qualifying conditions at S169K TCGA 1992 are met
If the company sells the business then ER is not due since it is not available to companies, a corresponding disposal of the shop by the OP would not qualify for relief since it is not used in a business carried on by the OP.
If however the OP sells his shares then this would qualify as would the disposal of the shop as an associated disposal.
It is the case that full ER would be available up to 05/04/08, but after that date ER is restricted to the non commercial element of the rent (S169P(4)).

In practice this causes problems since the buyer who acquires shares and subsequently becomes a director can be liable for pre acquisition debts, the availability of capital treatment is also threatened since the mere transfer of a business is not considered to be a withdrawal from it.

cde123
Posts:3
Joined:Wed Jun 03, 2015 8:25 am

Re: Entrepreneurs Relief query on associated disposal post 5/4/2008

Postby cde123 » Thu Jun 04, 2015 9:36 pm

Thank you for this guidance. In this case the purchaser is buying the stock, goodwill and fixtures and fittings of the directors company. The seller will then liquidate the company and claim ER on the capital payment of the residual funds left in the company. I assume therefore that they can still claim ER on the shop itself as you have stated above?

LozaACCS
Posts:1504
Joined:Wed Aug 06, 2008 3:55 pm

Re: Entrepreneurs Relief query on associated disposal post 5/4/2008

Postby LozaACCS » Sat Jun 06, 2015 8:34 am

I assume you are familiar with the rules and conditions at S1030 CTA 2010 for capital treatment, subject to those rules being met then yes ER would be available


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