Entrepreneurs’ Relief Case

Here’s an interesting one!

In Corbett [2014] TC 3435 the taxpayer succeeded with a claim for Entrepreneurs’ Relief, despite having told HMRC some time before that she had ceased to be an employee.

To summarise the facts;

  1. Mrs Corbett was the wife of a senior executive and worked as a clerical assistant, especially in dealing with his diary and frequent marketing trips.
  2. The shareholders (who included Mrs Corbett) were negotiating to sell the company shares.
  3. The potential purchaser, an AIM listed company told them it was ‘against their policy’ for the wives of senior executives to be employed by their Group.
  4. HMRC argued that her resignation, recognition of her as a leaver on form P14 and the fact she was awarded no personal remuneration after leaving meant there was no employment, so the relevant condition of being an employee for the 12 months proceeding sale could not have been fulfilled so no Entrepreneurs’ Relief was due.
  5. The taxpayer argued that the change was cosmetic and her husband received extra remuneration to compensate for her carrying on her pre-existing employment.

Conclusion

The First Tier Tribunal found in favour of the taxpayer, saying that the substantive point of the matter was that employment continued, and potential technical breaches of the minimum wage regulations etc., were irrelevant.

Comment

Whilst no doubt Mrs Corbett was delighted with the result, it may have been less stressful to her if she had planned matters more carefully and made sure her tax planning documents reflected what the courts finally agreed was the substance of the situation.

Use advance planning and professional advice to make life easier!

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One Response to Entrepreneurs’ Relief Case

  1. This part of the conclusion is quite interesting:

    “he substantive point of the matter was that employment continued, and potential technical breaches of the minimum wage regulations etc., were irrelevant.”

    I remember being asked one of those questions about whether someone is to be considered an employee rather than self employed. This was from a colleague from the firm’s employment department – and I remember her saying that just because someone was an employee for tax purposes, didn’t automatically make them an employee for employment law purposes.

    I forget the reasoning, but it perhaps it serves as a reminder that questions such as these have to be looked at in the context of the relevant legislation/subject matter that one is dealing with.

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