A client operates a company which manages a portfolio of flat management companies. It's income is derived from charging a fee for managing all aspects of the flat management companies.
Client is now disposing of the company and I am checking whether entreprenuers relief is available on the sale of the shares. Everything seems to qualify (1 year ownership rules, 5% of voting rights etc) however I want to double check that a company managing a portfolio of flat management companies is regarded as a "trading company". From my research it is, as it owns no investments (apart from bank interest) and receives no rental income. It's purley a management charge which forms the company's turnover and apart from bank inetrest there are no other investments.
Am I correct to treat this type of company as a "trading company" for entreprenuers relief?
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On the face of it I would say it is trading for ER purposes. My only reservation is are these flat management companies owned by unconnected parties?
Yes the flat management companies are owned by unconnected parties.
May I ask why this is significant? :)
If they were connected it might be argued that the company was not carrying on a genuine trade although I accept the point is debatable. After all, if a stand alone company with property investment does not qualify then why should a separate company hived off to undertake the management function?
You have an extra "un", I think.
Of course once you get into vat registration territory any "edge" such an approach might have ,if residential property involved, might well be lost.
