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In The Quentin Skinner 2005 Settlements v HMRC [2019] TC7312 the FTT approved an Entrepreneurs relief claim on a sale of shares by a trust: the 1 year period did not have to be met by a qualifying beneficiary if they already met the personal company conditions for shares held personally.

Entrepreneurs' Relief (ER) is available on the disposal of eligible business assets held in trust in certain circumstances (s169J TCGA 1992).

In July 2015 three members of the Skinner family (“the Beneficiaries”) were each given an interest in possession in the whole of the settled property of three separate family settlements.

The FTT allowed the appeal, the judge referencing the explanatory notes to the ER legislation as an aid to the interpretation of s169J. The notes say:

“Subsection (4) (of s169J) describes the “relevant condition” that must be satisfied if the settlement business assets are shares in or securities of a company… The condition applies to the qualifying beneficiary the tests that would have applied under section 169I(6) or (7) if the qualifying beneficiary were an individual making a claim for entrepreneurs’ relief in relation to a disposal of the shares... So the condition is that throughout a period of one year ending within the three years up to the date of the disposal:

The judge took this to mean that, as with the situation where an individual sells personally owned shares in a company, once the personal company conditions are met, additional shareholdings which are owned by a trust for which the individual is a qualifying beneficiary, will automatically qualify for relief, even if he has not been a qualifying beneficiary for the requisite period (this was 1 year for the period in question).

Comment:

The decision here contradicts the guidance in HMRC’s manuals (as amended sometime in 2018/19) which say:

“A “qualifying beneficiary” is an individual who throughout the relevant 2 year period has an interest in possession (other than an interest in possession which has a fixed term) in the whole of the settled property of the settlement, or in a part of the settled property that contains the settlement business assets disposed of - TCGA92/S169J(3)..“

This was apparently not referred to at the FTT hearing by either HMRC the tribunal judge, but is not the exact wording of s169J(3) TCGA, which does not actually mention any relevant period.

Links to our guides:

Entrepreneurs relief

Entrepreneurs relief: disposal of trust business assets

UK trusts: At a glance

External link:

The Quentin Skinner 2005 Settlements v HMRC [2019] TC7312