Case Study – Jeremy Rice was being hassled by the taxman…. 

Jeremy (Jerry) first came to us with a bit of a problem!  He’d been trading for a number of years as a motor-dealer operating from a High Street site, dealing mainly in performance vehicles. As is often the case, customers were attracted by the vehicle display in his showroom or on the forecourt. However, around 10 years ago, he began to get more and more exasperated by the amount of vandalism at his premises and decided to relocate his business to his home address in an outlying village, where he had ample room to store and display the vehicles. His plan was to sell the former showroom, which had development potential.

So what was his problem? Ironically, if all had gone to plan and his property had sold quickly there probably wouldn’t have been an issue. But  –  when he eventually sold the premises almost three years later, his accountant advised him that he could claim Entrepreneurs’ Relief on the capital gain. This was duly claimed in his 2008/09 tax return – and HM Revenue & Customs disallowed it!


To claim ER on the disposal of an asset formerly used in your business, you must show that there was a cessation of that business. HMRC took the view that Jerry was a motor-trader before and a motor-trader afterwards and therefore there was no cessation. The change actual occurred before the implementation of ER – so the impact of this, understandably, hadn’t been considered.

The ER claim reduced Jerry’s tax by over £20,000 –  which HMRC was claiming back plus interest.

What did we recommend?

First of all, we researched statute and case law – and discovered that the leading cases held that a change in the way a business operated could amount to a cessation, even if the proprietor continued to trade without any formal cessation.  The leading case of Ingram contrasted a slow and gradual (‘organic’) change with a sudden and dramatic change, and another case established that the relocation of a business could give rise to a cessation of trade where the mode of business also changed.

We began to see the possibility of a challenge to the HMRC decision. A key meeting with Jerry established that:

  1. the reason for his relocation was the vandalism
  2. having taken the decision to relocate, he met with difficulties from the local authority who refused to allow him to  display vehicles openly or advertise the location
  3. he therefore now traded entirely through the internet, whereas previously most sales can from customers visiting the showroom in person
  4. he had changed the type of vehicles he sold and also changed the name of the business

A further issue arose over the date of the alleged cessation, as the date of the sale of the premises was perilously close to the three year window in which ER could be claimed.

We recommended that we should seek to persuade HMRC of the strength of Jerry’s argument, and also lodge an appeal at the First Tier Tribunal to safeguard his claim.

What happened?

Our attempts to argue the case with HMRC were unsuccessful  – not least because the case had already passed through all the internal stages before we were consulted.

The correspondence between Jerry’s former accountant and HMRC was confused and made no attempt to argue the case on solid case law grounds.

HMRC persisted in ‘putting the cart before the horse’  by stating that even if there were a cessation, the disposal of the premises was outside the three year window (although this was by no means certain).

We proceeded to prepare the case for the Tribunal hearing.

At the Tribunal

Our skeleton argument countered each and every one of the reasons advanced by HMRC for challenging Jerry’s claim. In a number of cases,  the information provided to HMRC was inaccurate and contained discrepancies. This meant that the way was clear for the emphasis to be on Jerry’s own recollection rather than on documentary evidence. We spent a lot of time with Jerry identifying the relevant points and how these could be substantiated.

On the day  –  we successfully argued that the primary issue was whether or not  there had been a cessation. Our contention, based on case law, was that this was at least possible. Now it was up to Jerry to tell the tale as it was   – how he came to the decision to relocate, what happened to change his original plans, and how his new business differed from his old one. And he spoke convincingly about all of this.

Then came the issue of when exactly the cessation occurred. We had evidence of the date of the sale and the date (almost three years earlier) when empty premises relief was claimed for business rates. Could we show that the date when Jerry actually ceased in business was near enough to the date the premises were empty? There was no documentary  evidence but Jerry was able to anchor his recollections of the date to various other events that took place around that time.


Jerry’s appeal was successful! – because:

  • we researched the relevant case law and applied it to the known facts
  • we provided a well-constructed and cogent argument which took all the issues into account
  • Jerry was a credible and confident witness on the day, basing his evidence on the detailed investigation we had carried out with him

We were committed to our task of presenting the best possible case for our client – and Jerry was able to move on with his business plans.

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