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No relief for taxpayers with no trade

Tax tribunal dismissed a taxpayers’ claim to entrepreneurs' relief as their business activities, which mostly consisted of letting, were not deemed to amount to a trade.

16th Dec 2019
Tax Writer
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Property to let signs

Stephen Reneaux and Lynne Reneaux-Smith (TC07441) jointly acquired two units of commercial premises in Slough (the premises) in 1993 and 1998 respectively. The total cost for both units was £397,404.

Between 1993 and 2003, Stephen Reneaux traded at the premises as a freelance MOT tester and vehicle mechanic. Lynne Reneaux-Smith worked part-time for Reneaux’s business, dealing with the administration and accounts.

Leasing begins

In 2003, Reneaux’s business was sold to a third party, who also leased the premises from the taxpayers from that date until June 2011.

The taxpayers (who, by 2011, were divorced) agreed to work together to derive income from the premises. In February 2012, they set up a business – Junction Six Storage and Workspace Hire – that offered workshop facility hire in one unit and secure storage in the other.

From 1 November 2012 to 31 March 2013, Chalvey Car Service hired out a unit to store its stock of classic cars. At the same time, the workspace hire business was producing income in the other unit, with Stephen Reneaux also occasionally using the unit to carry out vehicle maintenance and store some of his heavier tools.

On 9 May 2013, the taxpayers disposed of the premises for £600,000 to the owner of Chalvey Car Service. The disposal was reported in each taxpayer’s 2013/14 tax return, with both claiming ER.

After an investigation, HMRC concluded that the taxpayers were not entitled to ER. The taxpayers appealed this conclusion.

What is a trade?

A business for ER purposes is defined in TCGA 1992, s 169S(1) as anything which:

“(a) is a trade, profession or vocation, and

(b) is conducted on a commercial basis and with a view to the realisation of profits.”

The FTT considered two possible trades: Reneaux’s work as a freelance MOT tester and vehicle mechanic, and the provision of storage facilities and workshop hire at the premises.

  1. Reneaux’s freelance work

The first tier tribunal (FTT) determined that Reneaux clearly carried on a trade as an MOT tester and vehicle mechanic.

However, the FTT found that the taxpayer’s limited use of the premises was not sufficient to meet the requirements of TCGA 1992 s169I(2)(b), as Reneaux acknowledged that his use of the premises was at most “a couple of times a month”.

Further, as Reneaux’s freelance work did not cease when the premises were sold, the FTT determined that the trade did not fall within the provisions of TCGA 1992 s169I.

  1. Provision of storage facilities and workshop hire

The FTT considered the badges of trade, specifically the frequency of transactions, to determine whether the activities relating to the provision of storage facilities and workshop hire amounted to a trade.

The leasing of storage space for cars was found to be a single transaction and so did not amount to a trading transaction.

As to the hiring out of the workshop space, the FTT noted that, while the activity may have had the necessary frequency, the FTT did not hear any evidence that the activity was substantial.

Additionally, the FTT noted that Reneaux-Smith’s supervision of the workspace hiring activity a few times a week was not presented as a substantial activity.

As such, none of the activities in question was considered to constitute trading, and so ER was not available. The taxpayers’ appeal was dismissed.


Determining whether or not an activity amounts to a trade can be a tricky affair.

While the FTT conceded that a larger scale business that provides storage facilities may well be carrying on a trade, the scale of the taxpayers’ activities, in this case, was so limited that they could not amount to a trade. As a result, ER was not available on the sale of the premises.

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