The case concerned business asset taper relief and the transfer of a share in a trading consortium, before trading had begun

CM CHAPPEL v HMRC, Sp C 2008, [2009] SSCD 11 (Sp C 717)

Two individuals formed a property venture consortium for property ventures in which each held a 50% interest.

One of the individuals subsequently sold a 5% stake in the consortium to a company for £500,000; however at this point, the consortium had not actually begun trading. He submitted a self-assessment return claiming business taper relief.

HMRC issued an amendment rejecting the claim and charging tax on the £500,000. The taxpayer appealed, contending business asset taper relief was due as the consortium was a trading venture.

It was held that the consortium was a partnership and that what was sold was a partnership share or interest. However the partnership had not yet acquired any assets and therefore had not begun trading, since it is impossible to commence a trade without acquiring trading assets.

The partnership interest that C had sold was a capital asset liable to capital gains tax, but was not an asset that was being used for the purposes of a trade carried on at the time of the disposal by a partnership of which the appellant was a member.

Accordingly the sale did not qualify for business taper relief.