In Stephen Reneaux and Lynne Reneaux-Smith v HMRC [2019] TC7441, a claim for Entrepreneur’s Relief under the associated disposal rules failed. There had been a partnership, however it was not engaged in any trade.

  • The taxpayers had joint interests in two business units, ‘the Premises’ in 1993.
  • Mr Reneaux’s trade was as a freelance MOT tester and mechanic. Mrs Reneaux-Smith had provided administration and accountancy services as an employee of his business.
  • The MOT business was sold in 2003 and Mr Reneaux continued to store equipment at the Premises. He continued working as a freelance tester, but not from the premises which had lost its Vehicle and Operator Service Agency (VOSA) license.
  • The appellants were still paying off a loan on the Premises and they decided to let it for secure storage and workspace hire. They split the income and expenses equally between them and now divorced, they did not file a partnership tax return.
  • They sold the premises in 2013 at a profit and claimed capital gains tax (CGT) Entrepreneurs' Relief on their gains.
  • HMRC denied relief on the basis that, there was no partnership in existence and the disposal was not matched by the disposal of a qualifying trade.

On appeal to the First Tier Tax Tribunal (FTT), the FTT found as follows:

Was there a qualifying trade? No:

  • The question of whether or not a business amounts to trading is one of fact and degree.
  • A business ‘letting hundreds of individual storage units…might well be carrying on a trade’.
  • Renting two units for storage and workspace did not amount to a trade: the activities in question in this case do not constitute trading.

Had there been a partnership? Yes:

  • The appellants did not have any formal partnership agreement and had only failed to file partnership returns because they were unaware that they needed to.
  • The storage business had been carried on as a business in common with a view to profit and so met the definition of a partnership according to the Partnership Act 1890.

Could the conditions for Entrepreneurs Relief by met otherwise? No:

  • Mr Reneaux was still trading as a freelancer and had not ceased trading.
  • Mrs Reneaux-Smith had not traded from the premises.


Hindsight is a wonderful thing, as they say, and had the couple not been divorced some planning for Entrepreneurs' Relief may well have been possible.

Topical tax guides

Entrepreneurs' Relief: associated disposal (partners and company owners)
When does Entrepreneurs' Relief apply? What is the rate of Entrepreneurs' Relief? How to claim Entrepreneurs' Relief. Case law on Entrepreneurs' Relief. What on earth are the rules for associated disposals of business assets?

Virtual Tax Partner Toolkit: Entrepreneurs' Relief
Pay-as-you-go tools to instantly calculate and plan complicated reliefs and avoid the 'claim disallowed' pitfall.

When does a partnership exist?
Why does it matter? What are the implications for different taxes?

What are the three main types of partnership?

Capital Gains Tax Reliefs
What relief applies for the disposal of a business, a trade or its assets?

Is it a trade, a business, or an investment activity?
Is your business a trade, a business, or an investment activity? The distinction is very important for tax purposes. This guide summarises key issues.

External links

Stephen Reneaux and Lynne Reneaux-Smith v HMRC [2019] TC7441