Material disposal (sale or gift) of an asset used in a business



Disposal of business assets at the time of cessation

For the disposal to be ‘material’ the business must have been owned by the taxpayer throughout one year prior to cessation of the business, and the asset must be sold within three years of the cessation TCGA 1992, s 169I(4)

Both of these are dependent on the date of cessation of the business. As HMRC state at CG64105, the date of cessation of a business is a question of fact. This will be the point that the business is permanently discontinued, in accordance with ITTOIA 2005, s 202.

This can occur even where the owners intend to continue trading, but ultimately they do not. This means that there can be an element of retrospective subjectivity in determining when a business has ceased. However, it is rare for this to apply to claims for entrepreneurs' relief. If it is an issue you should consider HMRC's guidance in their business income manuals in the first instance. BIM70565-BIM70585

Entrepreneurs’ relief is only given in respect of ‘relevant business assets’ (ie assets used for the purpose of the business such as business premises, goodwill (but see below for a further restriction for related party transfers), plant but not shares or other assets held for investment purposes). TCGA 1992, s 169L

It is worth noting that the conditions only refer to the business being owned throughout one year prior to disposal / cessation rather than the business asset. This means that relief can be obtained for chargeable assets purchased within the year as long as they are brought into use in the business

 Restriction of relief for disposals of goodwill on after 3 December 2014

A restriction on Entrepreneurs' relief on the disposal of goodwill to certain related parties was introduced for disposals on or afer 3 December 2014. Details of this can be found Entrepreneurs' relief: restriction on certain disposals of goodwill