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Peter Vaines comments on a recent tax tribunal case regarding Entrepreneurs' Relief.

Some useful guidance has been provided by the Tribunal in the case of Gilbert v HMRC TC1542.

Mr Gilbert carried on a business of selling food on commission representing 9 different suppliers. He sold part of his business to one of his suppliers and claimed Entrepreneurs' Relief on the resultant gain.

The sale was of all the business connected to that particular supplier and the brands. The supplier bought the database containing the list of customers and all the goodwill which went with it.

HMRC rejected the claim to Entrepreneurs' Relief on the basis that it was merely a disposal of business assets which was not enough to satisfy the requirements for Entrepreneurs' Relief. There also needs to be “the disposal of the whole or part of a business”.

However, the tests put forward by HMRC seem to be more appropriate to a situation where somebody is carrying on more than one business and sells one of the businesses – rather than the statutory test of selling part of a business.

The Tribunal had no difficulty in concluding that this was the sale by Mr Gilbert of part of his business as a going concern including the customer database, the goodwill, the trademarks and business information together with the benefit and burden of contracts and records.

The Tribunal observed that during their reading they discovered where the test put forward by HMRC came from. They drew attention to the fact that the test advanced by HMRC had been queried by the High Court in another case and substantially weakened by the House of Lords who considered that the matter should be looked at in a different way.