In The Trustees of the Peter Buckley Settlement v HMRC [2024] TC09022, the First Tier Tribunal (FTT) found that Capital Gains Tax (CGT) Entrepreneurs’ Relief was not available on a trust’s share disposal. The company was not the qualifying beneficiary’s 'personal company' for the required period.

  • The Peter Buckley Settlement (the settlement) was created on 31 March 1999, with Peter Buckley (PB) as the principal beneficiary, to whom income was payable for life.
    • PB’s daughter was the settlement’s remainderman.
    • PB was not originally a trustee of the settlement but did become one at some point, along with another individual.
  • In 2015-16, the settlement claimed Entrepreneurs' Relief (ER) (since renamed Business Asset Disposal Relief), on the sale of a single share in Peter Buckley Clitheroe Ltd (PBCL), on 8 November 2015.
  • PBCL was a trading company, incorporated on 2 June 2009.
    • PB was a director of PBCL from incorporation to 9 November 2015.
    • PBCL’s share capital consisted of one Ordinary voting share which was originally issued to PB.
    • The share was transferred by PB to the settlement on 9 September 2012.
  • In January 2018, HMRC opened an enquiry into the settlement’s ER claim.
  • HMRC issued a Closure notice in May 2021, denying the settlement’s ER claim and assessing a further £251,280 in Capital Gains Tax (CGT).
    • HMRC’s position was that for the trustees to validly claim ER on the share disposal, PB would have needed to hold 5% of PBCL’s shares in his own right for one year within three years leading up to the date of disposal by the settlement.
    • This condition was not met: the only share in PBCL had been held by the settlement since 2012 and not PB personally.
  • Following a Statutory review, which upheld HMRC’s closure notice, the trustees Appealed to the First Tier Tribunal (FTT).

The FTT found that:

  • PB held the only share in PBCL in his capacity as a trustee of the settlement. He was not the only beneficiary of the settlement and did not own the PBCL share personally.
  • While the trustees had the power to bring the settlement to an end in favour of PB, they had not done so by 8 November 2015. The PBCL share was vested in the settlement immediately before it was sold.
  • As PB did not own the single PBCL share in his personal capacity, as required by s.169S(3) TCGA 1992, HMRC were correct to disallow the claim for ER.
    • The clear intention of Parliament was that to qualify for ER, PB must have owned at least 5% of the shares and voting rights in PBCL in his personal capacity for one year ending within the three years prior to disposal. He had not, and ER was not, therefore, due.

The appeal was dismissed.

Useful guides on this topic

Business Asset Disposal Relief (Entrepreneurs' Relief): Disposal of trust business assets
When can trustees claim Business Asset Disposal Relief (BADR)? Which types of trust is BADR available to? Who can claim BADR for a trust disposal of business assets?

UK Trusts
What is a trust? What types of trust are there? How are UK trusts taxed?

How to appeal an HMRC decision
Disagree with an HMRC decision? How do you appeal, what type of decision can you appeal and what are your different options when you disagree with HMRC? What are the key steps in making an appeal?

Share capital: What's an ordinary share?
What is an ordinary share? Why is it important?

External link

The Trustees of the Peter Buckley Settlement v HMRC [2024] TC09022