In Peter Kennedy v HMRC [2021] TC7987, the First Tier Tribunal (FTT) dismissed a claim for Entrepreneurs’ Relief by a shareholder who was not an employee or officer of the company for the year prior to the share disposals.

  • Mr Kennedy claimed Entrepreneurs’ Relief (ER)  (since renamed Business Asset Disposal Relief) on two share disposals in BGlobal plc (BG). The first resulted in a gain of £2,555,589 in 2014/15. The second resulted in a gain of £449,397 in 2015/16.
  • Mr Kennedy had various senior management roles within BG which he founded.
  • From May 2009 Mr Kennedy split his role with BG between a salaried directorship and a consulting agreement through a service company (PKL). He received a nominal fee for director duties and the majority of his remuneration was through PKL. 
  • Mr Kennedy ceased to be a director of BG following a resolution of shareholders on 15 August 2013. He received no remuneration from BG thereafter in either capacity.
  • Mr Kennedy’s amended 2013/14 tax return stated that his employment ceased on 15 August 2013.
  • HMRC issued closure notices denying the ER claim on the basis that Mr Kennedy was not an officer or employee throughout the required period.
  • Mr Kennedy appealed to the FTT as he contended that he was employed until the disposals.

The FTT found that:

  • Mr Kennedy served as an officer from May 2009, the role being merely director duties.
  • The remainder of his duties were provided through a consultancy agreement via PKL.
  • Draft, unsigned documents produced little evidence of the duties of some of the roles.
  • BG’s termination of the directorship complied with company law and its articles of association.
  • Mr Kennedy ceased to be an officer on 15 August 2013.
  • No ER was available on the disposals.

The appeal was dismissed.


This case illustrates that while splitting duties into separate roles might have benefits from an employment tax perspective, there may be further implications for other taxes or administratively.

Useful guides on this topic

Business Asset Disposal Relief (Entrepreneurs' Relief)
A freeview guide:  What is BADR? How to claim BADR.  

Business Asset Disposal Relief (Entrepreneurs' Relief)
A subscribers guide: What is BADR?  When does BADR apply? What is the rate of BADR? How to claim BADR. Case law on BADR.

Business Asset Disposals 
When can you claim Business Asset Disposal Relief (BADR) on a share sale? What are the potential issues for shareholders?

Personal Service Company tax
What is a PSC?  What are the tax implications for a PSC? 

External links

Peter Kennedy v HMRC [2021] TC7987

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