In the case of Pontin & Ors v HMRC [2026] UKFTT 1166 (TC), the FTT has upheld an appeal against an HMRC decision to deny entrepreneurs’ relief on the sale of shares in a holding company (Highland Holdings Limited (“HHL”)), that owned a company (Associated Properties UK Limited (“APUK”)), that was seeking to redevelop a business and industrial complex as a residential site.
CAPITAL GAINS TAX – entrepreneurs’ relief – whether company’s activities included to a substantial extent activities other than trading activities taking it outside the definition of “trading company” in section 165A(3) Taxation of Chargeable Gains Act 1992 – no – appeals allowed
By the time of the appeal, HMRC had accepted that throughout the Relevant Period of one year up to the date of disposal of the shares APUK was carrying on activities with a view to its starting to carry on a trade and that it started to carry on the trade, as soon as was reasonably practicable in the circumstances. However, they argued that APUK did not meet the definition of “trading company” as its activities during the Relevant Period included to a substantial extent activities other than trading activities, being the continued leasing of the property to industrial tenants.
The company did not agree arguing that the rental activities were not substantial and APUK simply allowed the Property to continue to produce rent without investing or making any efforts to prevent the Property’s decline and that the lack of investment made this point clear as did the profile of rents.
Reviewing the position, the FTT concluded that:
“Looking at all these factors in the round, we see that during the Relevant Period:
(1) a very significant part of APUK’s physical activity was focused on development, not investment, activity.
(2)That activity led to APUK carrying on a very successful development trade (as envisaged in the Option Agreement) which generated over £25m of profit in due course.
(3) The Property, APUK’s only meaningful asset, was held with the predominant intention of being redeveloped and sold off in the course of that trade. APUK had done far more than decide that it wanted to carry on a development trade; it had started to take action, which proved to be very successful, to bring a development about and it dealt with the Property in a way which was entirely consistent with that goal.
(4) APUK derived some legacy, long-term investment income, but during the Relevant Period it took steps to bring that income stream to an end before the HHL Shares were sold.
(5) In the Relevant Period APUK derived some rental income from short-term leases which were a natural part of its development plans; they contributed to its costs and held down its business rates liability, were granted on terms which meant that they would not hinder the development when it started and were beneficial in terms of those development plans (avoiding creating a negative impression before the crucial Neighbourhood Plan referendum).
(6) What may be a relatively high percentage (65%) of non-management fee/business rates expenditure appears to be linked to non-trading activity, but that is not a fully interrogated number, likely overestimates non-trading expenditure and at £58,000 does not represent a material cost, particularly when seen in the light of the management fee (which in Mr Pontin’s view underestimates his contribution to the development).
None of this points to non-trading activities, physical or financial, being of material or real importance in the context of the activities of APUK during the Relevant Period. …
… For the reasons set out above, we have decided that during the Relevant Period APUK’s activities did not include to a substantial extent activities other than trading activities and so throughout the Relevant Period HHL was the holding company of a trading group.”
https://caselaw.nationalarchives.gov.uk/ukftt/tc/2026/1166
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