My client owns a 20 acre fishing lake which is currently let annually to a fishing club. If he sells the fishing rights to his company can he claim Entrepreneur Relief? Would the situation be different if he were to go into partnership with the company and he was to introduce the rights as an asset in the partnership. The lake is currently held in a family farming partnership. Any chance of classing it as a larger than average fishing pond (under capital allowances)...?
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It is a transfer of land rights
Fishing rights are, under land law, a right over land. They are normally structured as a lease, licence or profit a prendre.
In my opinion, as a result of the above, in each case the income that is derived from the fishing rights are rights arising from land (eg rent of some shape, size or decription). As such no ER would be due on the sale of the rights.
The only way that there might be an argument for ER is if your client actively manages the lake undetaking activities such as re-stocking and clearing but I think that it would not be an easy argument especially as it appears that it is let to one "person" annually.
I think you mean S.12(1) & (4) John
But the words "calculated as if the concern were a trade" are indicative that the activity isn't, in fact, a trade, as would be required for ER to be available.
thanks
for those comments. If the rights are sold to the company are they then an intangible? Apparently we are also now looking at shooting rights being transferred. It is difficult but not impossible to demonstrate that the lake and grounds have been managed by my client. Restocking hasn't been an issue because the fish are mainly Carp and apparently they are a little on the large side having been there for a considerable number of years and always returned after being caught.
Its is a whole business or part of a business?
Remember ER doesn't apply when disposing of a single business asset. The gain must arise from the disposal of a whole business or of part of a business which is capable of being operated on its own. The transfer of fishing rights alone does not sound like a sufficient 'part of a business' to qualify for ER.
the transfer
would be on the back of a change in the partnership so we should be ok from that side, sorry should have made that clear!
Almost Steve
I actually meant 10 and 12, shows what doing things without checking does!
I've had, now, s10/12 'trades' treated as a business for Retirement Relief in the past. The rules hark back to the old Schedule B and are every out of line with the real world.
TCGA states that:
'trade' has the same meaning as in the Income Tax Acts
So if you fall within s10 I think that you do get relief, and if you fall wiithin s12 which extends s10 then I would still argue that you follow the same rules for IT/CGT.
What is the activity?
In the case of McGregor v Adcock 51TC692 ( a retirement relief case on farming) Fox J states "A business connotes activity." and then goes on to state "A business involves activity by the person conducting it. Mere occupation of land is not enough." So going back to my original post, I think that you need to demonstrate real activity to be able to think about an ER claim.