Entrepreneurs' relief: restriction on certain disposals of goodwill

Entrepreneurs' relief is not available on disposals of goodwill on or after 3 December 2014 to a close company (or to a company which would be a close company if it were UK resident5) to which the seller is related.

Goodwill is not one of the “relevant business assets” for such disposals if, as part of a qualifying business disposal a person (P) disposes of goodwill directly or indirectly to a close company (C) and at that time P is a related party to C for the purposes of CTA 2009 Part 8 (see D1.672), and P is not a retiring partner6. P is a retiring partner if7—

•	  (a)     the goodwill is that of a partnership of which P is a member, and at the time of the disposal P is not, and no arrangements exist under which P could become, a participator in C, or in a company which has control over, or holds a major interest in C (“a relevant participator”);

•	  (b)     P is a related party in relation to C because he is an associate of one or more relevant participators; and

•	  (c)     P is only an associate of each of those relevant participators because they are also members of the partnership.

Goodwill is also precluded from being a “relevant business asset” for such disposals if P is party to arrangements one of the main purposes of which is to secure that the goodwill is a relevant business asset, or that P is not a related party in relation to C8.

Where these provisions apply the gain on other business assets on such disposals is not affected