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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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Entrepreneurs’ Relief: qualifying disposals by trustees

TCGA92/S169J

Entrepreneurs’ Relief is available where there has been “a disposal of trust business assets”. TCGA92/S169J(1) provides that there is such a disposal where three conditions are satisfied. Those conditions are that —

  1. The trustees of a settlement dispose of “settlement business assets”;

“Settlement business assets” are assets which are part of the settled property of the settlement and are shares in or securities of a company, or interests in such shares or securities, or assets, or interests in such assets, that have been used for the purposes of a business - TCGA92/S169J(2).

  1. An individual is a “qualifying beneficiary” of the settlement;

A “qualifying beneficiary” is an individual who has an interest in possession (other than an interest in possession which has a fixed term) in the whole of the settled property of the settlement or in a part of the settled property that contains the settlement business assets disposed of - TCGA92/S169J(3).

  1. One of two “relevant conditions” is satisfied.

The first “relevant condition” must be satisfied in cases where the settlement business assets disposed of are shares in or securities of a company, or interests in such shares or securities.

The condition applies to the “qualifying beneficiary” the tests that would have applied under TCGA92/S169I(6) or (7) (see CG63975) if the “qualifying beneficiary” were an individual making a claim for Entrepreneurs’ Relief in relation to a disposal of the shares, securities or interests in shares. Thus throughout a period of 1 year ending within the 3 years up to the date of the disposal - TCGA92/S169J(4):

* the company must be the qualifying beneficiary’s personal company - see CG64050;
* the company must be a trading company or the holding company of a trading group - see CG64060, and
* the qualifying beneficiary must be an officer or employee of the company or of one or more companies that are members of the group - see CG64110.

The second “relevant condition” must be satisfied in cases where the settlement business assets are assets, or interests in assets, that have been used for the purposes of a business. The condition applies, in relation to the qualifying beneficiary, broadly the same tests under TCGA92/S169I(3) and (4) as would apply to an individual making a claim for Entrepreneurs’ Relief in respect of a disposal of the assets. The condition is that - TCGA92/S169J(5):

* throughout a period of 1 year ending within the 3 years up to the date of the disposal, the settlement business assets are used for the purposes of a business carried on by the qualifying beneficiary, and
* the qualifying beneficiary ceases to carry on the business at some time during that 3 year period.

Where settlement business assets are disposed of and the qualifying beneficiary is a member of a partnership that carries on the business, the qualifying beneficiary is treated as ceasing to carry on the business either when the qualifying beneficiary ceases to be a member of the partnership, or when the partnership ceases to carry on the business - TCGA92/S169J(5).

See CG64140 where there is a disposal of trust business assets and there is at least one other beneficiary apart from the qualifying beneficiary.