Owner-Managed Businesses

Business asset disposal relief for partnerships

Produced by Tolley
  • 25 Oct 2021 07:04

The following Owner-Managed Businesses guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Business asset disposal relief for partnerships
  • Overview of business asset disposal relief for partnerships
  • Disposal of a share of the partnership
  • Disposal by the partnership
  • Advance planning
  • Ceasing a business
  • Selling part of a business

Business asset disposal relief for partnerships

This guidance note discusses the application of business asset disposal relief (previously known as entrepreneurs’ relief) for partners only. See also the Conditions for business asset disposal relief guidance note. For further guidance, see Simon’s Taxes C3.1302C–C3.1303A.

The only provisions for chargeable gains directly applicable to partnerships are found at TCGA 1992, s 59 and TCGA 1992, s 59A. The latter is for a Limited Liability Partnership (LLP). In both cases the effect is to make the partnership transparent for the purposes of chargeable gains.

Other than in the cases described in TCGA 1992, s 59A(4) in relation to an LLP going into liquidation or being wound up, all partnerships are transparent for chargeable gains purposes.

This note considers the chargeable gains position for individual partners' eligibility for business asset disposal relief.

Overview of business asset disposal relief for partnerships

Each individual who is a partner in a business at any time is treated as owning the business carried on by the partnership at that time. Therefore, an individual's transactions in connection with becoming or being a member of a partnership can qualify for business asset disposal relief as they would if the individual carried on the business on his own account.

To be eligible for business asset disposal relief, a disposal must be:

  1. a material disposal of business assets

  2. a disposal that is associated with a material disposal, or

  1. a disposal of trust business assets

TCGA 1992, s 169H

Only the first two options can apply for partnerships. The third option requires that the business is owned by a trust. See the Business asset disposal relief (entrepreneurs’ relief) ― trusts guidance note.

There will therefore be four different situations where business asset disposal relief applies to a partner:

  1. a disposal by the partnership of the whole or part of the business

  2. a disposal by a partner of the whole or part of their interest in the partnership

  3. a disposal of partnership assets within the permitted

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