Associated disposal

We have a client who is likely to sell his family company shares. The company operates rent-free from factory premises owned by the client personally.

The property will be sold to the purchasers of the company shares and the total gains from the shares and the premises will be under £1 million.

So far so good. The relevant conditions appear to be met to claim entrepreneurs’ relief (ER) on the ‘associated disposal’ of the premises except that the company was incorporated in 2001 and the general assets and liabilities of the sole trade were transferred to the company in return for a director’s loan account at that time.

The factory which was acquired in 1985 and used by the sole trader up to 2001 was retained in the client’s personal name. The property was therefore owned and used in the sole trade for a...