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HMRC internal manual

Capital Gains Manual

Entrepreneurs’ Relief: disposal of assets after cessation of business

Rather than disposing of a business, possibly as a going concern, someone may cease in business and then sell off the business assets. Such disposals will not constitute the sale of the whole or part of a business for TCGA92/S169I(2)(a) but may instead qualify as disposals of assets sold after the cessation of the business for TCGA92/S169I(2) (b) and TCGA92/S169I(4) - see CG63975.

The conditions which must be satisfied for relief to be due on a disposal of an asset after cessation of the business are -

  • the asset must have been in use for the purposes of the business at the date of cessation TCGA92/S169I(2)(b);
  • the asset cannot be a holding of shares or securities or any other asset that was held as an investment TCGA92/S169L(4) - see CG64005;
  • the business must have been owned by the individual throughout a period of at least one year ending with the date the business ceased TCGA92/S169I(4)(a) (note that a business is treated as being carried on by an individual if carried on by a partnership of which he or she is a member TCGA92/S169I(8)(c); and
  • the disposal must take place within the 3 year period following the cessation of the business TCGA92/S169I(4)(b).

Relief under this provision is not available where there is a disposal of assets formerly used in a company, which has ceased to trade. The Retirement Relief case of Plumbly v Spencer (71TC399) has no relevance because of the condition in TCGA/S169I(4)(a) that the business has to be carried on by the individual. In such circumstances Entrepreneurs’ Relief may however be available as an ‘associated disposal’ under TCGA92/S169K - see CG63995.

Disposal of assets after cessation: 3 year period

The 3 year period is a statutory limit. HMRC have no discretion to extend the period.

The date of the cessation of a business is a question of fact. Determining the date will usually be straightforward but for less clear cut cases when there is a wide difference between possible dates and this is material to a claim for relief there is guidance in the Business Income Manual to assist you. See BIM80565+ in particular.

The usual Capital Gains rules apply when determining the date on which a disposal takes place (see CG14250+).