For the last 10 years, Mr A has been the 100% shareholder and sole director of B Ltd whose sole activity is manufacturing kitchen equipment for sale. The business operates from a freehold building owned personally by Mr A. The ltd co does not pay any rent for the use of the building. Mr A has now received an offer for the assets of the company (not the shares) and for the building. The company will pay CT on the gains within the company. Mr A does not wish to withdraw the remaining cash in the company but rather to use it to fund the company's new business of overhauling boats. However, Mr A wishes to claim Entrepreneurs Relief on the capital gain made on the building. I do not think he can as there is no Material Disposal, but he feels that as he has effectively ceased trading and sold his business he is entitled to claim. Views please.
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Is there any particular reason that he wants to keep the same company while starting a new trade?
He's clearly disposing of a business owned by his company and starting a new business, albeit within the same Ltd company. It seems to me that it would qualify for Entrepeneurs Relief if he was lifting the cash out of the limited company and starting a new company to carry on his boat trade but it seems that it might be blocked if he decided for some reason not to dispose of his shareholding in the current company.
I think I would advise him to start a new company for the new trade unless there's some overwhelmingly good reason not to, has he given any reason why he wants to start a new trade in the old limited company?
... has he given any reason why he wants to start a new trade in the old limited company?
One obvious reason is that he would rather not pay the tax it would cost him to extract the cash from the old company before introducing it to the new one. Whether the tax saving on the property of being able to claim entrepreneur’s relief on it is worth the extra tax on liquidating the company is something only the OP can tell us, because we don’t have the numbers.
No ER on the disposal as there needs to be a material disposal of business assets (i.e. 5% shareholding) for the disposal to be an 'associated disposal'.
This is where a bit of forward planning could've been useful (hive downs etc).
Might be best to wind-up the company via MVL and claim ER on the disposal then start a new company with a directors loan.
I would be pushing for a share sale to avoid a double charge to tax (could include indemnities/warranties if the purchaser is worried about future liabilities).