CG63990 - Business Asset Disposal Relief: qualifying disposals by trustees: example

Entrepreneurs’ relief was renamed in Finance Act 2020 with effect from 6 April 2020. The new name is generally used in this guidance but should be read as applying to times before that date.

Over the last 18 years C has built up a thriving business manufacturing garden furniture. In August 2020 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 £400,000. He claims Business Asset Disposal Relief in respect of this ‘material disposal’ of his whole business. This is his first claim for Business Asset Disposal 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 £1,500,000.

The qualifying beneficiary (C) and trustees jointly claim for Business Asset Disposal 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 Business Asset Disposal Relief and the property is a “settlement business asset” used in C’s business throughout the 2 years prior to the disposal of his business.

The disposal happened after 11 March 2020 so the lifetime limit of gains that qualify for relief is £1 million so that trustees qualify for Business Asset Disposal Relief on £600,000 of the gain of £1,500,000.