My clients (husband and wife) owned a property owned in joint names for the last 20 years, and this was run as a joint (qualifying) furnished holiday letting (FHL). The husband died in January 2017. The FHL business then ceased on his death. Wife inherited the husband's share of the FHL with the uplift in CGT base cost. The property was then empty until the sale in March 2018. For the wife's 50%, the FHL was traded up to one year before cessation, and the sale was within three years after cessation, so I think entrepreneurs’ relief (ER) will apply. But does ER apply to the 50% inherited from the husband in these circumstances, as the wife didn't trade that half during the period one year up to date of cessation? Does the husband's ownership period transfer to the wife for ER purposes??
Arthur Weller replies:
ER does not apply to the 50% inherited from the husband in these circumstances. There is no facility for the husband's ownership period to transfer to the wife for ER purposes. But since the wife inherits her husband's 50% at its market value at the date of death (probate value) - January 2017, there can't be much capital gain on the March 2018 sale of the inherited 50%, because most likely it has not gone up that much in the space of one year and two months
This question was first printed in Business Tax Insider in January 2019.