Take Care on Business Disposals

Business owners will be aware that entrepreneur’s relief operates to reduce the Capital Gains Tax on qualifying business assets and that the availability of the relief can be crucial in obtaining a low-tax exit when a family business is sold.



However, as with all reliefs, HM Revenue and Customs (HMRC) insist that the qualifying criteria are met. One of the important traps facing people expecting to obtain entrepreneur’s relief is that if the disposal is a disposal of assets, rather than a business or definable part of a business, the relief is not available.



A recent case showed the approach HMRC may take in some cases. It involved a food distribution business which was built up over the years. Eventually, part of the business, including the goodwill and trade marks, was sold to one of the former customers of the business.



HMRC attacked the vendor’s claim for entrepreneur’s relief on the ground that the sale constituted only the sale of assets, not of the business.



On this occasion, the First-Tier Tribunal rejected HMRC’s arguments.