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2009

Entrepreneur's Relief & Associated Disposals

Entrepreneur's Relief & Associated Disposals

An individual has owned a commercial property for the last 10 years.

The property has been used by his personal company for the last 4 years. Both the shares in the company and the property have now been sold, and the property qualifies as an "associated disposal".

For the first 4 years of ownership, the property was used by a different personal company of the individual, but the property was retained when that company ceased trading. For the next 2 years the property was rented to an unconnected Unlisted Company.

Section 169P(4) TCGA 1992 requires a restriction to the Gain that qualifies for Entrepreneur's Relief, but should the Gain that qualifies for Relief be restricted to:

A. 4/10ths of the Gain?
B. 8/10ths of the Gain?
C. No restriction is required?

Any clarification or comments gratefully received.
Michael

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By Anonymous
22nd Oct 2008 13:21

For what it is worth...
...I have come to the same conclusion as you, Neil.

Section 169P(4)(a) states that the restriction will apply to "assets which... are in use for the purposes of the business for only part of the period..." (not "a business for only part of the period...").

Incidentally, Section 169S(1) states "For the purposes of this Chapter “a business” means anything which—(a) is a trade, profession or vocation, and...".

I believe that the whole of the Gain in my question would have qualified for Business Asset Taper Relief and also for Retirement Relief.

HMRC are on record as saying that "The conditions for the new relief will be based broadly on the CGT retirement relief...", but that seems not to be the case with Associated Disposals.

But the question still remains in my comment below about a business that incorporates. Should the whole of the Gain qualify for Relief because "the business" is the same before and after incorporation, and it is just the trading structure of the business that has changed?

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20th Oct 2008 23:58

4/10ths
The gain is restricted taking into account the length of the period for which the property is in use for the purposes of the business being sold. (s169P(5)(a).

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By Anonymous
15th Oct 2008 16:54

And what about...
...all of those cases where individuals were advised to incorporate their businesses, but were advised to leave the commercial property outside of the company.

On an eventual sale of the shares and the property, does the Gain on the sale of the property that would otherwise qualify for Entrpreneur's Relief need to be restricted to exclude the period when the property was used by the unincorporated business?

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