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Entrepreneur's Relief - Mixed Trading & Lettings Operations
Client's company has two distinct operational threads of business, a trading business and the letting of wholly-owned residential property investments. The assets employed in the company are used wholly and exclusively for one operation or the other. The client is approaching retirement age and is seeking to make the best use of his entitlement to Entrepreneur's Relief when disposing of all or part of the business.
As I see it he has the following options available, notwithstanding the need to satisfy all the other necessary qualifiying criteria:-
1. Dispose of the company and/or assets in totality.
2. Dispose of the trading business and retain the residential property investments / lettings business for disposal in the future.
3. Dispose of the residential property investments / letting business and retain the trading business for disposal in the future.
I believe, mistakenly or otherwise, that the disposal of a residential property investment / lettings business or a business that comprises of both trading and investment operations would not qualify for Entrepreneur's Relief as it is only available for trading businesses. My assumption is that a residential property investment / lettings operation would be classed as an investment business. On that basis, adopting Options 1 or 2 would seem to be unattractive as relief would be denied on the disposal of the trading business operation. Adopting Option 3 would appear to be the best course of action insofar as it would attract relief for the disposal of the trading business operation.
I wonder if the wider community would give this scenario some thought and confirm or reject my conclusions. As I mentioned earlier, I fully accept that I may be mistaken in my understanding of this scenario and that there are better strategies available, so please feel free to correct my ignorance and broaden my overall knowledge.
When you have a company
When a company owns the assets and the business, it is the company making a gain on a disposal and paying corporation tax. A shareholder can get ER on a disposal of shares in a trading company or a holding company of a trading group, if it meets the requirements of a personal company for the right period of time. It sounds as though this is not a trading company for ER purposes because of the property investment assets but that could depend on the size of the trading operation.