Entrepreneur's relief is available when an owner of a business makes a gain on a disposal of the business or business assets. The relief works by reducing the tax on any gain made to an effective rate of 10% (for disposals after 23 June 2010).
A retiring GP partner could never make a gain on disposing part of a GP partnership as GPs are forbidden from selling the goodwill of a practice. Therefore they could never sell their part of a partnership for more than the money they have invested in it, which would not result in a capital gain.
However, one area that could generate a gain is the sale of, or part of, the surgery premises, as property transactions must be done at market value in line with capital gains tax law and stamp duty.
Qualifying for relief
To qualify the disposing partner must have owned the building for a least a year.
The partner also has to reduce their participation in the practice, either by fully retiring or by selling a share of the surgery to the remaining partners having taken 24-hour retirement.
However, there is a three-year period after the time the partner reduces their involvement in the practice in which they have to sell their share in the practice for the relief to still apply.
If the partner received a market rent for the property while they owned the building, entrepreneur's relief does not apply to the gain apportioned to the period after 5 April 2010.
- Russell Finn is a client principal with specialist medical accountants Ramsay Brown & Partners, www.ramsaybrown.co.uk