I submitted a non-statutory business clearance application to HMRC concerning the availability of entrepreneurs' on the potential sale by a client of shares in their company. The company is a trading compny and always has been but does hold substantial cash balances for which, in my opinion, there are good trading reasons.
I am comfortable with the various arguments for and against the availability of ER on the sale of shares in a trading company which holds cash but wondered whether anyone had any ideas of how to proceed in the event of disagreement with HMRC's opinion.
It seems that the main option is to go ahead with the sale of the shares and if there is disagreement with HMRC, prepare the return on the basis of ER being available and then thrash it out with HMRC when the inevitable enquiry begins. Given the amount of tax at stake in this case, this course of action is unpalatable and the client requires certainty before going ahead with the sale.
Does anyone have any ideas?
Replies (3)
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Do you have a negative clearance?
Are you saying that HMRC have already given the opinion that ER isn't available?
It seems to me that the only thing you can do which you can do that offers your client certainty, is to not claim ER.
As you say, the only other open alternative is to disagree with HMRC, claim the relief and then bully it out. You've weakened your argument slightly though by seeking clearance, as it might be suggested that it's an expression of doubt on your part. That's one of the major cons of Self Assessment and the non-statutory clearance process.
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I would be interested to hear the result of your clearance. I have tried this option once before and I got a negative opinion ( I was wishing to know if two companies were "connected" ).
There have been one or two ER cases coming through the courts recently but the fundamental test is stll 80:20 as far as I am aware.
IMO - Large cash balances should not have a great detrimental effect on the "trading" argument unless the trade was very weak.