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

[cde123]

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]

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

[taxmenot]

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]

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]

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]

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