Entrepeneurs Relief Qualifying Conditions

Entrepeneurs Relief Qualifying Conditions

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A husband and wife partnership has been trading as a small engineering business for approximately 20 years.  Profits are allocated 1/3 to the husband and 2/3 to the wife.  The business turns over a little under £200,000 per annum and makes taxable profits of around £20,000 per annum.  The husband is also the sole director and shareholder in a limited company involved in the same type of engineering work.  This follows the retirement of his fellow director and shareholder in the limited company a year ago.  The former business partner in the limited company was an unrelated third party and his shares were purchased by the husband on his retirement.  Both businesses trade from the same premises.  They occupy different areas within the premises and each business owns and uses its own plant and equipment.  It has been suggested that the two businesses should be merged into one following the retirement of the former shareholder and director and the preferred method of merger is to transfer the partnership business to the limited company.  I cannot find any guidance on qualifying conditions for entrepeneurs relief where business assets are disposed of to a connected party, but I cannot help but feel that HMRC would be unhappy about this.  The premises are rented and therefore the CGT disposal would essentially be one of goodwill, and the valuation of this is going to be very subjective given the connection between the partnership and limited company. Does anyone have experience of a similar case?

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