Entrepreneurs' relief

Entrepreneurs' relief

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My client is a retired farmer who ceased completely in September 2011. Most of the land and farm buildings have been sold over the years.

Back in 2004 he built and moved into a house on part of his land and built some stables all of which are within an area of about half an acre and the original farmhouse was sold. He still owns about seven acres adjoining. The stables, surrounding yard and remaining land have been used partly for the family horses/parking/personal storage and partly in connection with a livery business operated by the farmer up until September 2011 and then by his wife (and for which she paid a rent to her husband).

The stables and surrounding yard were sold in 2014. We are considering claiming private residence relief on the stables as they fall within the gardens and grounds of the house and we understand that no part was used exclusively for business as their own horses have been housed therein throughout. We are concerned however that this may jeopardise entrepreneurs' relief on the remaining gain.

In spite of the private residence relief covering the whole of the latter period gain, the stables were still being used for business purposes up until the date of retirement, so Is entrepreneurs' relief available on the chargeable element? (It was sold within the three year time limit after cessation.) Or will the fact that the gain attributable to the initial period is liable to CGT, whereas the latter period is covered by PPR relief mean that HMRC are likely to argue that the "business asset" was not a business asset at the date of retirement?

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By michaelblake
29th Jan 2015 09:40

There are two issues here that you may not have considered

In principle an asset can qualify for both PPR and ER. The PPR is calculated first and then any gain not qualifying for PPR can be considered under the normal ER rules. The definition of a relevant business asset at Section 169L confirms that it is an asset used for the purposes of the business, and not one so used exclusively.

Two issues that you will need to consider are: 

1. The PPR is likely to be apportioned on a time basis over the whole of the period that the land has been owned even though the house was only built in 2004, following Henke  

2. Whether HMRC will accept that the livery business as a trade,  or will want to argue that the livery income is simply that of a UK property business, which does not qualify as a trade and therefore cannot fall within the definition of a business at Section 169S.

We are expert at dealing with these matters at TaxAction.org.uk but only on a fee basis I am afraid. 

 

 

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