ER relief

[jarjarbinks]

Hello
Looking to liquidate and avail of ER .. hold around 100k in the business. However my accountant is unsure about ER relief.
Can anybody please advise..

In his words :
There are rules that identify whether a trading company qualifies. Income has to be 80% trading which your company is and the balance sheets and assets must be 80% for trading purposes. The fact that you hold high levels of cash could be questioned as not being for the trade so that might jeopardize your claim.

Many consider the build up of cash must be trading if it was generated from the trading activity but there is an area of doubt here that means I cannot guarantee that it would be ER relief.

Thanks

[Lance]

you'd need to use a specialist company anyway so talk to them.

MVL Online come highly recommended.

And try searching these forums as this topic is very common.

[Maslins]

What your accountant says does hold some validity, however personally I think they're being overly cautious. There are four "20% tests".
- assets of the company,
- turnover of the company,
- expenditure of the company,
- director's time.

If you can easily demonstrate that for the bottom 3 of those, 80+% relates/has related to trading activities, the fact that yes having £100k sitting in a savings account earning a pittance in interest isn't strictly required for the trade of this business should not in itself invalidate a business asset disposal relief (BADR, what was ER) claim. Otherwise virtually every single MVL Online client would fail to qualify.

If however you have more active investments, like BTL properties, and/or you get fairly significant income from them, incur significant expenditure related to them, and devote a reasonable chunk of your own time to dealing with them, then you may have an issue.

[jarjarbinks]

What your accountant says does hold some validity, however personally I think they're being overly cautious. There are four "20% tests".
- assets of the company,
- turnover of the company,
- expenditure of the company,
- director's time.

If you can easily demonstrate that for the bottom 3 of those, 80+% relates/has related to trading activities, the fact that yes having £100k sitting in a savings account earning a pittance in interest isn't strictly required for the trade of this business should not in itself invalidate a business asset disposal relief (BADR, what was ER) claim. Otherwise virtually every single MVL Online client would fail to qualify.

If however you have more active investments, like BTL properties, and/or you get fairly significant income from them, incur significant expenditure related to them, and devote a reasonable chunk of your own time to dealing with them, then you may have an issue.

Many thanks Maslins and Lance for your prompt replies .