Company was not trading so entrepreneurs’ relief not due

The taxpayers were shareholders in a company SGL which acquired a land in West London in 2011. The company categorised the site as an investment.

About three years later as a result of the local authorities relaxing their planning restrictions the company appropriated the site to trading stock. It later sold the site.

The taxpayers then sold their shares in the company and claimed entrepreneurs’ relief. HMRC challenged the claim on the basis that the company never traded.

The First-tier Tribunal took the badges of trade as a ‘useful starting point’. Among its conclusions were that the desire to make a profit was an important part of being a trader however it did not follow that that desire meant that person was carrying on a trade. The judge said ‘in deciding whether a person is trading it is not enough to ask whether a person is...