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HMRC internal manual

Capital Gains Manual

Entrepreneurs’ Relief: qualifying disposals by trustees: example

Over the last 18 years C has built up a thriving business manufacturing garden furniture. In February 2012 he receives an unexpectedly good offer from a national chain of garden centres so decides to sell the business. This disposal of his business produces gains of £2,000,000. He claims Entrepreneurs’ Relief in respect of this ‘material disposal’ of his whole business. This is his first claim for Entrepreneurs’ Relief.

C is also the beneficiary of a settlement. The property from which he carried on his business belongs to the settlement of which he is tenant for life (this being the sole interest in possession). When C disposes of his business, the trustees also decide to sell the property at the same time. This gives rise to a gain to the trustees of £1,600,000.

The qualifying beneficiary (C) and trustees jointly claim for Entrepreneurs’ Relief in respect of the gain arising on the disposal of the settlement property. Because the disposal by C of his business is a ‘material disposal’ by him as an individual which qualifies for Entrepreneurs’ Relief and the property is a “settlement business asset” used in C’s business throughout the 12 months prior to the disposal of his business, and the gains of C and the trustees are less than £10 million in total, the trustees qualify for Entrepreneurs’ Relief in respect of their gain of £1,600,000.