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Entrepreneurs' Relief - asset let to partnership

Entrepreneurs' Relief - asset let to partnership

My client, Mrs R, is in a farming partnership with her husband and son.

Entirely separately, she owns a 1/4 share of another farm with her brothers and sister. One of her brothers farms that farm and Mrs R receives rental income for his use of her 1/4 share.

It is now possible that she may sell her 1/4 share and at present it would appear that Entrepreneurs' Relief (ER) will no apply as she has no involvement in that partnership.  If anyone can confirm that my assumption is correct, I would be very grateful.

There is no possibility that Mrs R could join the partnership with her siblings, so I wondered whether ER may be claimable if Mrs R was to transfer her 1/4 share of the farm she owns with her siblings to the farm partnership with her husband and son?  The rental income would then be paid to that partnership and could presumably be treated as being trading income.  Then in the event of a sale in that situation, not only would there be three annual exemptions to use, but we may be able to argue that this was the sale of part of a business?

What does anyone think, does this sound like it is something that may be possible?

Many thanks

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23rd Feb 2016 17:50

Not in my opinion

ER only applies where there is a cessation of all or a significant part of the trade the asset is being used for. As she is not withdrawing from the business which uses the land the relief cannot apply.

It makes no difference transferring the land to her partnership as that just brings the sale forward.

 Also, in my opinion, rental income to the partnership is not trading income anyway. The only time it can be included within a farmers profits is where the costs of the rented property cannot be separated out from the running costs of the farm which is obviously not the case.    

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