Entrepreneurs Relief

mania112

A husband and wife are 50/50 shareholders in a limited company.

They're looking to retire within 10 years. They want to sell a £700k business property and move this money into a pension to fund their retirement (over the course of several years, obviously)

They are then selling the business to their son (who will presumably look to buy another property)

Does the £700k qualify for Entrepreneurs Relief?

somethingcorporate

For the sake of £700k it's worth seeking the advice of a professional rather than a completely anonymous forum.

What does their accountant say?

nomunnofun

I would have some doubts as, in my view, the business has to cease PRIOR to the sale of the asset.

zygurat789

It depends who owns the property, the implication is it is owned by the Ltd.
In which case there can be no Entrepreneur's relief and the whole of the capital gain will be taxed as Corporation Tax. Any allowable payments to the company pension fund may reduce the liability to Corporation Tax.
If the property is owned by the directors then they may be entitled to Entrepreneurs relief on the whole £700K

nomunnofun

zygurat789 wrote: »

It depends who owns the property, the implication is it is owned by the Ltd.
In which case there can be no Entrepreneur's relief and the whole of the capital gain will be taxed as Corporation Tax. Any allowable payments to the company pension fund may reduce the liability to Corporation Tax.
If the property is owned by the directors then they may be entitled to Entrepreneurs relief on the whole £700K

Yes - I missed the very first line of the op's post.

Pennywise

nomunnofun wrote: »

I would have some doubts as, in my view, the business has to cease PRIOR to the sale of the asset.

Likewise - it has to be a material disposal of the business to qualify for ER. If they aren't selling the business at/around the same time, then there may not be ER available. They'd be better to sell the business to the son, then sell the premises shortly after. Check the rules as regards timescales etc.

Have they thought about inheritance tax? At the moment, if one/both of them dies, the "business assets" are exempt from inheritance tax and so could be passed down without IHT. However, if they sell the property and/or business, the proceeds will no longer be exempt and IHT may arise upon their death.

Definitely one to ask a good tax accountant - not amateurs on a forum.

zygurat789

Why bother with a sale, a move, a repurchase and a pension. Not to mention the taxman's hassle.
Just pay them a fat consultancy fee. £20k-£25K each
Keep it in the family

chrismac1

This needs very careful consideration by someone who knows all of the rules about ER and also Business Property Relief. The rules are similar but have significant differences too. Apparently meaningless changes to structure etc. can mean one or other relief is lost.

At least you are in plenty of time. Get proper advice at least a year - preferably 2 - before a possible completion date and explain exactly what future plans are. Then you can get good quality advice and the transaction can be completed in the way that meets those individual needs.