Entrepreneurs Relief, associated disposal.

Entrepreneurs Relief, associated disposal.

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Scenario: Individual (A) holds 100% of shares in a holding company, The group consists of a trading company with substantial T/O, and one or two companies that exist to envelope the commercial premises used by the trading company for business purposes. By definition, though group is a trading group.

A third party (B) offers to buy the trading company, but does not want the properties, and so the company (ies) holding the properties is/are demerged from the group, and the holding company shares sold to B. This qualifies for ER.

Having no further use for the properties, A sells the shares in the company (ies) holding the properties to an unrelated person (C) within three years of the initial disposal.

A's holding in this/these companies would represent an interest in property used by a qualifying trading company, but would TCGA 169L(4)(a) exclude ER on the later sale?

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By gbuckell
30th Sep 2016 10:29

As you point out, a sale of shares cannot be an associated disposal. I would look to claim that the sale is eligible by reason of TCGA 1992 s169I(7)(b).

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By Steve Kesby
30th Sep 2016 10:32

I don't think A's holding in the property owning companies is an interest in property. It is an interest in shares in companies that have interests in property.

I don't think s. 169L(4)(a) even comes into point. However if A's holding in the property owning companies were to be considered to be an interest in property (which they won't), s. 169L(4)(a) would exclude it.

You need to have shares within the material disposal provisions, which might have been achieved in these circumstances by satisfying condition B in s. 169I(7).

Has the demerger already happened?

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By SteveHa
30th Sep 2016 10:37

No, this is the planning stage for a reconstruction, but we don't want to advise on something that could ultimately be very costly.

169I(7) looks like it may do it. Thank you.

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