Finance Act 2015

42Entrepreneurs’ relief: exclusion of goodwill in certain circumstances

(1)Chapter 3 of Part 5 of TCGA 1992 (entrepreneurs’ relief) is amended as follows.

(2)In section 169H (introduction), in subsection (3), for “section 169L” substitute “sections 169L and 169LA”.

(3)In section 169L (relevant business assets), in subsection (2), after “including” insert “, subject to section 169LA,”.

(4)After that section insert—

“169LARelevant business assets: goodwill transferred to a related party etc

(1)Subsection (4) applies if—

(a)as part of a qualifying business disposal, a person (“P”) disposes of goodwill directly or indirectly to a close company (“C”),

(b)at the time of the disposal, P is a related party in relation to C, and

(c)P is not a retiring partner.

(2)P is a related party in relation to C for the purposes of this section if P is a related party in relation to C for the purposes of Part 8 of CTA 2009 (intangible fixed assets) (see Chapter 12 of that Part (related parties) and, in particular, section 835(5) of that Act).

(3)P is a retiring partner if the goodwill is goodwill in a business carried on, immediately before the disposal, by a partnership of which P is a member and at the time of the disposal—

(a)P is not, and no arrangements exist under which P could become, a participator in C or in a company that has control of, or holds a major interest in, C (a “relevant participator”),

(b)P is a related party in relation to C because P is an associate of one or more relevant participators, and

(c)P is only an associate of each of those relevant participators because they are also members of the partnership.

(4)For the purposes of this Chapter, the goodwill is not one of the relevant business assets comprised in the qualifying business disposal.

(5)If a company—

(a)is not resident in the United Kingdom, but

(b)would be a close company if it were resident in the United Kingdom,

the company is to be treated as being a close company for the purposes of this section (including for the purposes of determining whether a person is a related party in relation to the company for the purposes of this section).

(6)If a person—

(a)disposes of goodwill as part of a qualifying business disposal, and

(b)is party to relevant avoidance arrangements,

subsection (4) applies (if it would not otherwise do so).

(7)In subsection (6) “relevant avoidance arrangements” means arrangements the main purpose, or one of the main purposes, of which is to secure—

(a)that subsection (4) does not apply in relation to the goodwill, or

(b)that the person is not a related party (for whatever purposes) in relation to a company to which the disposal of goodwill is directly or indirectly made.

(8)In this section—

• “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable);

• “associate”, “control”, “major interest” and “participator” have the same meaning as in Chapter 12 of Part 8 of CTA 2009 (see, in particular, sections 836, 837 and 841 of that Act).”

(5)The amendments made by this section have effect in relation to qualifying business disposals made on or after 3 December 2014.