Would entrepreneurs relief apply?

Question:

I am currently a sole trader but am considering incorporation now. I owned 75% of the business for 10 years and acquired the remaining 25% in March 2012. Would entrepreneurs’ relief apply to the 25% or would I have to wait until 12 months from April 2012 in respect of that 25% proportion of the business?

Arthur Weller replies:

If you look at www.hmrc.gov.uk/manuals/cgmanual/CG63975.htm it says "each individual who is a partner in a business at any time is treated as owning the business carried on at that time by the partnership". HMRC’s Capital Gains Tax team in Cardiff has explained this to mean that since you have been a partner in the business for more than 12 months you have fulfilled the 12 month condition to claim entrepreneurs' relief on disposal of the whole of the business. So you don't need to wait until April 2013 to claim relief on the other 25%.

This question was first printed in Business Tax Insider in December 2012.