Entrepreneurs' relief and disposal of business assets

Entrepreneurs' relief and disposal of business...

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I am reading the conditions for ER and in particular for the disposal of business assets (say a warehouse) and I am hoping someone can tell me if I am reading this correctly.

A disposal, say, of a warehouse at the same time is a material disposal. (TCGA 1992s169I)

If the warehouse was disposed of at a later date, the disposal is an associated disposal (s169K)

If there is any non business use (ie the warehouse was let out partly to a third party - say 1/4 of it) then ER would be restricted if it was an associated disposal, but not restricted if it was a material disposal.

Is this correct?

Also, s169K says that an associated disposal is an asset used and owned by an individual used in either a partnership or a personal company.  Does that mean that there is no relief for a sole trader who has the warehouse if he does not dispose of the warehouse at the same time as disposing of the business.

Much obliged for any responses.

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By michaelblake
04th Sep 2012 19:47

Apportionment provisions for ER

Karen 

If a sole trader (or a partnership) disposes of a business or part of a business or disposes of assets that were in use for the purposes of the business when the business ceased, and the assets are disposed of within three years of the business ceasing (section 169I) there are no provisions within TCGA 1992 Pt V Chapter 3 to restrict the relief where the asset was used partly for trade purposes and partly let.

Conversely where an asset owned personally by a partner or a shareholder is disposed of and qualifies as a disposal associated with a relevant material disposal (Section 169K)  there will be a restriction of the relief if the asset has been used only partly for trade purposes or used only part of the time for trade purposes or a rent was charged (Section 169P).

The issue therefore is not one of timing (although that may be relevant) but of how the asset is owned.

This is one of many anomalies in the ER provisions and if you do not feel totally confident in dealing with the issues advice may be sought on a fee paying basis at

taxaction.org.uk

or elsewhere.

 

Michael Blake

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