Entrepreneur's Relief extended

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Published: 29 Feb 2020

The window of opportunity for claiming Entrepreneur’s Relief has opened a little wider.


This extension will be particularly interesting to people who have sold their trading company in the last two years.

Entrepreneur’s Relief limits the tax to 10% on the first £10m of gain on the sale of the company. I guess this is not a problem for most of us, unless your name is Richard Branson!

To qualify, certain rules have come into play that need to be observed.

Previously, the company must have been trading for at least one year ending with the date of sale of the company.

However, it is now two years.

Or, previously if the company had been trading for a year. This is now two years ending within three years prior to its liquidation.

The precedent has been set in the case of Gatebright Ltd, which traded on the London Metal Exchange.

HMRC argued at the First Tier Tribunal (FTT) that it had ceased trading before the three-year period prior to liquidation had started. Mr Potter, its director, claimed that he had dealt with a number of personal matters in that period, including active attempts to keep the company trading.

The FTT found in favour of the taxpayers, Mr and Mrs Potter, as shareholders of Gatebright Ltd that it was a trading company for the period in question and, therefore, could claim Entrepreneur’s Relief. In other words, although no business was secured after the three-year period commenced, a trade does not automatically come to an end because there is a gap in deals being done.

The argument may be less plausible if the trade was that of a retail shop, but if the circumstances fit, it may be well worth trying.

If the scenario described is relevant to you or someone that you know, feel free to call David Cane on 07749 080 806 or send an email.