Will this arrangement affect a claim?

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Client ceased operating a small holiday complex business in March 2023 and, sadly, a proposed sale of this fell through.

Another sale is now in prospect to a developer. I am confident that the site would normally qualify for BADR on disposal because of the facilties on offer, however the current proposal is somewhat unusual. The sale is set to take place at the end of March next year with exchange and completion taking place on the same day and this will be well within the 3 year period following cessation of the business. The developers wish to have a licence to occupy in the meantime with a view to erecting a show lodge ready for development and marketing of further lodges, for which planning pernission already exists on a section of the land.

There will be all sorts of safeguards in place to protect my client, which is the domain of the lawyers, but my question is whether the granting of a licence to occupy in such circumstances could in any way affect a claim to BADR. The two matters appear to be entirely separate and I cannot find any legislation suggesting that BADR would be affected but wonder whether I may be missing something? Any pointers gratefully accepted.   

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By Ruddles
13th Jun 2024 19:48

Your client should be fine. It’s the type of scenario, though, that HMRC do not understand. A bit like the case I had where trading company had all but ceased a year before sale of shares and continued to hold a sizeable investment portfolio. HMRC argued that the company was not a trading company throughout the 2 years prior to sale (which it wasn’t) but claimed that the 3-year rule didn’t apply because the trade hadn’t ceased. Overlooking the requirement only that the company ceased to be a trading company as defined for ER (sic) purposes. No apology, no admission that they were wrong, just a closure notice.

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By codling
14th Jun 2024 08:47

Thanks Ruddles, That is very reassuring. Fairly typical of how HMRC deal with us though and I would not be surprised to receive an enquiry!.

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