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HMRC internal manual

Capital Gains Manual

Entrepreneurs’ Relief - “disposal of part of a business”: meaning

In many cases there will be no difficulty in deciding whether there has been the disposal of the whole or a part of a business.

For example, a trader may sell the whole of their business as a going concern. Clearly the trader has sold the business. But there may be cases where the position is less clear. For example, someone may own two shops in different towns and sell one of them, but continue with the other. Whether or not this amounts to the disposal of the whole or part of a business depends on the facts. The trader may be able to show that entirely separate businesses, connected only by common ownership, were conducted from each shop. Another possibility is that the activities at each shop, while contributing to a single business, form a separate, distinct and clearly identifiable part of the trade. A further possibility may be that the shops are identical in nature but the disposal was of a complete business capable of continued operation whilst the retained business also continued without break.

For example, one shop may have been an outlet dealing exclusively with wholesale customers while the other was used only for retail purposes. Whether there are one or two separate businesses is a question of fact and guidance to help determine the matter can be found in the Business Income Manual at BIM20050+. Cases of difficulty should be referred to the Business Profits Team using the procedure set out in the intranet version of that manual.

The particular question for Entrepreneurs’ Relief is whether a part of a business has been disposed of. This question will arise when only some of the assets of the business are sold. The important point here is that a disposal of a business asset or assets is not necessarily a disposal of the whole or part of a business.

Where it is not clear whether or not there has been a disposal of the whole or part of a business, it is critically important to establish all the relevant facts, so that a complete picture of the business, including the changes which have been made to it, can be built up for the period involved.

Help in deciding whether there has been a disposal of the whole or part of a business, and what assets are included in any such disposal can be derived from the judgements in decided cases concerning Retirement Relief. Most of these concern farming businesses and they are discussed below.

The Retirement Relief case law does not always provide certainty and it may be necessary to refer cases of difficulty in applying the guidance on this question to the Capital Gains Technical Team using the procedure set out in the intranet version of the Capital Gains Manual. But generally the question will be one of fact and the answer will be arrived at by informal agreement or determination by the First-tier Tribunal.