Preparatory steps leading to disposal were inadequate

The taxpayer operated two nursery schools. In 2011 her adviser suggested she transfer the business to a limited company. She made preparations to do this and in November 2013 MDNSL was incorporated with the taxpayer as sole director and shareholder. However the business transfer did not happen until August 2015 although the taxpayer said the unconditional contract for the disposal was made in September 2014.

The taxpayer claimed entrepreneurs’ relief in her tax return for the disposal of her business to her company - MDNSL.

HMRC refused the claim saying there was no written agreement between the taxpayer and MDNSL.

Under TCGA 1992 s 169L as amended by FA 2015 if the disposal took place before 3 December 2014 entrepreneurs’ relief would be available so capital gains tax would be charged at 10%. If the disposal took place on or after...