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March 11, 2014
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Case of a Material Disposal - Entrepreneurs' Relief

See our Spring 2014 Tax Update for more recent cases.

Case outcomes in relation to Entrepreneurs' Relief are always of significant interest given the "Holy Grail" 10% tax rate potentially available.

Jeremy Rice v HMRC [2014] UKFTT 0133 (TC)) tested whether the disposal of a property occured within three years of the cessation of the tax payer's sole trader business (TCGA S169I(4)).

If it did then entrepreneurs relief would be available to reduce the CGT bill on the sale of the property by around £21k; this is because the sale of business assets within 3 years of the cessation of that business qualifies as a "material disposal of business assets".

A lot of the discussion within this case centred around whether Mr Rice's car trading business had ceased, and if so, when  it ceased.

The taxpayer in Rice was successful in his claim for Entrpreneurs' Relief because the Tribunal felt that the change in the business carried on by the taxpayer was significant enough for the first business to have ceased and a new business commenced.

Although the evidence regarding the date of cessation was incomplete, on balance the Tribunal concurred with the taxpayer that the disposal was within 3 years of the cessation of the first business.

Whilst Entrepreneurs' Relief was available in this case, the position would likely have been less contentious had tax advice been taken prior to the cessation and sale because relevant documents and other contemporaneous records could have been retained to support the claim.

See our Spring 2014 Tax Update for more recent cases.

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