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Would this work to get ER

Client farmer is getting on a bit.  He owns the freehold to two farms personally and he is a 50:50 partner with his wife in a trading farm partnership.

Farm A has been passed down through the generations and Farm B was acquired by him about 20 years ago. 

Both farms are controlled out of 1 farmhouse and it is effectively one farming business carried out over the two pieces of land.

He wants to sell farm B because work is getting on top of him and wants to downsize.

I have explained that ER would not be available on the disposal of the Farm B given that he is not retiring or giving up his business.  He is merely reducing the scale of operations.  That unfortunately is not what ER is about.

It has been suggested to me that to help this case, we could have Mr Farmer reduce his interest in the farming partnership from 50% to 25%, the wife becoming a 75% partner in the trading partnership and thereafter Farm B is disposed of.  Thus giving the opportunity to bolt the disposal of Farm B onto the disposal of half his interest in the business as an associated disposal. 

I think it is very contrived and open to question, but upon reading the legislation it would appear to be an option.

What do others think.


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21st Jun 2011 13:13

I think that works ....

.. having looked at something similar a few months ago.

But in the end, because the alternative was contrived, we split the part that was to be sold away into a new partnership with different partners. Once that new partnership has traded for a year then it can cease altogether with the sale and ER is beyond question. Some practical issues with the mechanics of how to actually run the farm for the year, but nothing insurmountable.

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By blok
21st Jun 2011 14:01


Many thanks,

Out of interest, how did you get round the gain on the first disposal to the new partnership?  Was gift relief involved?


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21st Jun 2011 14:24


... holdover should be available in full without difficulty. S260 TCGA I think (without looking).

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