Our article published here in June discussed the key requirements for Entrepreneurs’ Relief (ER) where trusts are concerned and HMRC’s restrictive view of the rules, which is not supported by legislation. The First-tier Tax Tribunal (FTT) supports our view in its recent judgment in The Quentin Skinner 2005 Settlement L & Ors v HMRC  UKFTT 516 (TC) in which it rejected HMRC’s argument that the beneficiaries needed to have held a qualifying interest in possession for at least one year before the disposal.
The FTT has held that a trust qualifies for ER even though the “qualifying beneficiaries” had held their qualifying “interests in possession” in the assets being sold for less than a year. This will be welcome news for trustees who have relied on the natural reading of the legislation and made disposals shortly after creating interests in possession for ER qualifying beneficiaries.
By Anthony Nixon, partner in the Tax, Trusts and Estates team