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TonyTax
TonyTax, Tax Consultant
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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If you dispose of a personal asset from which you were getting

Resolved Question:

If you dispose of a personal asset from which you were getting rental income from declared on your SA albeit below the market rental value, which was purely a commercial premises by which you operated your business from and was getting a wage from, are you entitled to get entrepreneurs tax relief if you sell the property and there is CT?
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi.

Can you give me some more detail please. When was the property last used by your business? What was the nature of your business? Who paid you rental income? Were you running your business from the premises at the same time as you were receiving letting income? Is the property owned by you or your limited company?
Customer: replied 2 years ago.

The property since 1969 has operated as a family business. My brother inherited it from my mother in 1999 and paid inheritance tax on the premises then. The business was loss making for nearly 5 years and despite our valiant efforts the decision was made to close it. He sold the property in October 2013 but the new owners allowed us to stay longer rent free so that we had a chance to pay the business debts. My brother still had to put 35k of his personal money in last week to close the company down debt free. So the company is now dormant. The rental income was paid by the family Ltd company of which he was the main shareholder and from which he drew a wage every month. Yes he was receiving rental income at the same time as his business was running from the premises. The commercial premises was owned by him and his company rented it from him. I hope this makes sense.

Expert:  TonyTax replied 2 years ago.
Thanks.

When did the business actually stop trading?
Customer: replied 2 years ago.

last week

Expert:  TonyTax replied 2 years ago.
Thanks.

Leave this with me while I draft my answer.
Customer: replied 2 years ago.

ok thank you

Expert:  TonyTax replied 2 years ago.

Hi again.

In order to qualify for ER, the asset used in the business (the property) needs to have been owned throughout a "qualifying period" of one year, that period ending on the date your brother either reduced his interest in the business by selling some of his shares in the trading company or the date the business ceased. An asset can be held for up to three years after a business ceases before being sold and still qualify for entrepreneurs' relief.

Since your brother sold the property before the business ceased and he did not sell any of his shares in the company at the same time as the property was sold, he won't qualify for ER I'm afraid. The property was sold in October 2013 and, since the business ceased trading last week, the property was not owned throughout the one year qualifying period which ended last week.

There is more information on entrepreneurs' relief in the HMRC helpsheet HS275 here.

I'm sorry this is not what you wanted to read. Let me know if you have any further questions.

TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15755
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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