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Businessman holding a puzzle piece, signifying a sole share | AccountingWEB | FTT Rejects ER Claim Due to Share Technicality
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Tribunal rejects entrepreneurs’ relief claim due to share technicality


The first tier tribunal has rejected a trust’s claim for entrepreneurs’ relief (now business asset disposal relief) on the basis that the sole share in the sold trading company was not held by the qualifying beneficiary personally.

22nd Mar 2024
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The Peter Buckley Settlement (“the Settlement”) was created in March 1999. At the relevant times, the trustees of the Settlement consisted of Peter Buckley along with a co-trustee. The principal beneficiary of the Settlement was Peter Buckley as life tenant, with his daughter as remainderman.

Between incorporation in June 2009 and November 2015, Buckley was a director of Peter Buckley Clitheroe Ltd (PBCL), a trading company. There was one ordinary voting share in the company, which was originally issued to Buckley before it was transferred to the Settlement in September 2012. At the relevant times, Buckley did not hold any shares in PBCL as an individual.

In November 2015, the Settlement disposed of the one share it owned in PBCL for close to £1.45m. The Settlement claimed entrepreneurs’ relief (ER) (now known as business asset disposal relief (BADR)) on the sale in its 2015/16 tax return.


ER/BADR allows a taxpayer to claim a reduced capital gains tax rate of 10% on qualifying disposals, up to a lifetime limit. At the time of the disposal in this case, the lifetime limit was £10m (though the limit has since reduced to £1m).

HMRC accepted that all the conditions in the legislation to qualify for ER had been met, save for the requirement for Buckley to have held at least 5% of the ordinary share capital in PBCL.

At the time of the disposal, subsection 169S(3) TCGA 1992 provided that a company is an individual’s personal company if the individual holds at least 5% of the ordinary share capital and that holding gives them at least 5% of the voting rights in the company. Note that since 29 October 2018, two further tests have been added to the definition of a personal company under subsection 169S(3).

Share not held in own right

While HMRC accepted that Buckley had been a director of PBCL from June 2009 until the date of sale in November 2015, HMRC noted that the one issued share in PBCL was held by Buckley in his capacity as a trustee of the Settlement from September 2012 until November 2015.

As Buckley did not own any shares in the company in his own right, HMRC concluded that he had not held the requisite 5% shareholding under section 169S for the period of one year within the three years leading up to the date of disposal.

Following an enquiry, HMRC issued a closure notice in May 2021, disallowing the ER claim and amending the amount of capital gains tax due. The trustees appealed [TC09022].


The only issue for the FTT to resolve was whether the one share in PBCL held by the Settlement of which Buckley was one of the trustees and the sole life tenant qualified Buckley to claim that he owned at least 5% of the ordinary share capital.

The FTT commented that, as a matter of trust law “the registered owner of a trust asset (ie the trustee/s) do not own the asset personally. That is the very essence of a trust – the legal ownership and beneficial ownership are split.”

The FTT found that Buckley was not the only beneficiary of the Settlement and therefore did not own the share personally at the date of the transfer.

While the FTT did note that the trustees had the power to bring the trust to an end in favour of Buckley, they had not done so by November 2015. At that date, the share belonged to the trust.

As Buckley did not own the single share in his personal capacity as required by section 169S(3) TCGA 1992, the FTT found that HMRC had been correct to disallow the ER claim.

The appeal was dismissed.


In its decision, the FTT commented that “the clear intention of Parliament was that to qualify for ER Mr Buckley must own at least 5% of the shares and voting rights in his personal capacity. At no time [in the qualifying period] did Mr Buckley hold the shares in his personal capacity.”

Replies (3)

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By Paul Crowley
22nd Mar 2024 15:58

Are the rules really a technicality?
Surely complying with the rules is the start point for tax reliefs?

Thanks (2)
Replying to Paul Crowley:
By FactChecker
22nd Mar 2024 22:30

Quite ... an open and shut case that should've taken under 15 minutes to conclude.

"While the FTT did note that the trustees had the power to bring the trust to an end in favour of Buckley, they had not done so by November 2015. At that date, the share belonged to the trust."

Or to put it another way, the appellant had plenty of opportunity to change things to his advantage prior to the sale ... but we haven't yet reached a point of Quantum measurement of ownership of shares (they still can have but one state at a time).

Thanks (3)
Replying to FactChecker:
By Paul Crowley
22nd Mar 2024 23:18

The trust was quite clearly serving a purpose that is not mentioned. Trusts tend to protect assets, but the tax is under different rules. the consequences are easy to get advice on. He could easily have taken advice before selling.
He wanted the trust protection for the share and the benefit of share not being in a trust as well.
The kind of case that should not clutter up the tribunal system.

Thanks (0)