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Entrepreneur’s Relief

Entrepreneur’s Relief

We have a client who is the Director and 100% shareholder in A Ltd. He used to run two pubs in the company. The building of Pub A was personally owned by the director and the building of Pub B was owned by the company. The director used to charge the rent to the company for the use of building of Pub A at market rate. In April 2011 the director sold the building of Pub A to a developer and hence ceased the business of Pub A. Further after selling the building the director decided to go South Africa and leave the UK permanently. He ceased the business of Pub B as well and gave that pub to a tenant to run the pub. After 15-16 months, as things didn’t go according to his plan in SA, he came back to the UK and acquired the pub from the tenant and started running the pub in the company.

My question is, whether the director is eligible to claim Entrepreneur’s Relief on the capital gains on the sale of the building of Pub A? I assume that even though there is no sale of share by the director, there is material disposal in way of cessation of the business. And therefore the sale of building should be considered as an associate disposal and thus the client is eligible to claim Entrepreneur’s Relief on the capital gains.

Can anyone please advise on this and suggest whether the relief can be claimed?


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07th Feb 2013 16:12

There are two issues here:-


i,. for the associated disposal rules to apply, he would have to dispose of his shares. The business was carried out by the Ltd comany, and hence this doe snot apply (it may depending on timing) be different if he had been a sole trader / partnership, in which cessation of business may have applied.


In any case, ER is restrcted where the building is rented. If is at market rent, from 6th April 2008 to when it was sold, then no ER will apply!

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