CG64140 - Entrepreneurs’ Relief – calculation – disposals by trustees: more than one qualifying beneficiary
TCGA92/S169O
Where trustees make a disposal which meets the conditions for
Entrepreneurs’ Relief only part of the gain may actually be
eligible for relief.
If in respect of an amount of the gain accruing in relation
to a disposal of trust business assets qualifying for
Entrepreneurs’ Relief, (see CG63985 for conditions) there
is:
- at least one beneficiary, besides the qualifying beneficiary, who
- at the “material time”
- has an interest in possession in the settled property of the settlement or in that part of the settled property that includes the settlement business assets that are the subject of the disposal of trust business assets,
the amount of the gain (qualifying for Entrepreneurs’
Relief) is determined by the reference to the qualifying
beneficiary’s proportional entitlement to the income of the
relevant settled property – TCGA92/S169O(1).
In such a case only the “relevant proportion” of
the amount arrived at under TCGA92/S169N (1) (see CG64125) is to be
taken into account in giving Entrepreneurs’ Relief in respect
of the disposal of those trust business assets. The remainder of
the amount which does not qualify for Entrepreneurs’ Relief
is a chargeable gain and subject wholly to CGT at the rate
applicable – TCGA92/S169O(2) & (3).
Proportion of the income to which the qualifying beneficiary is entitled
“Relevant Proportion”
The “relevant proportion” of the amount arrived at
under TCGA92/S169N(1) – CG64125 - is determined by reference
to the qualifying beneficiary’s proportional entitlement, at
the “material time”, to the income of that part of the
settled property that comprised the settlement business assets
disposed of.
If, at the material time, the qualifying beneficiary is
entitled to the whole of that income, no adjustment to the amount
arrived at under TCGA92/S169N(1) is required. But if the qualifying
beneficiary is entitled to, say, one-half of that income, the
relevant proportion would be one-half of the amount arrived at
under TCGA92/S169N(1).
Proportion of the income to which the qualifying beneficiary is entitled
In determining the proportion of the income to which the qualifying beneficiary is entitled, no account is to be taken of any entitlement other than that arising from the interest that makes the beneficiary a qualifying beneficiary. Any other interest in the income that the qualifying beneficiary may have is ignored TCGA92/S1690(5).
“Material time”
The “material time” is:
- in a case where the settlement business assets disposed of are shares or securities (or interests in shares or securities) is the end of the latest period of 1 year, ending within the period of 3 years before the date of the disposal, throughout which the conditions in TCGA92/S169J(4) (see CG63985) are met
- in a case where the settlement business assets disposed of are assets (or interests in assets) used or previously used for the purposes of a business, it is the end of the latest period of 1 year ending within the period of 3 years before the date of the disposal, throughout which the business was carried on by the qualifying beneficiary.
Example
The trustees make a disposal of shares on 31st March 2012
upon which a gain arises against which a claim is made for
Entrepreneurs’ Relief. The period of three years up to the
date of that disposal begins on 1st April 2009. The company in
which the shares were sold ceased to carry on its trade and the
qualifying beneficiary ceased to be an employee on the 31st
December 2011. Therefore at that date it ceased to be the
qualifying beneficiary’s ‘personal company’. The
‘material time’ would therefore be at the end of that
one year period i.e. 31st December 2011. If however the company had
ceased to trade and the qualifying beneficiary ceased to be an
employee after 31st March 2012 the ‘material time’
would be 31st March 2012.
