Five unconnected individuals wanted to establish a private equity/venture capital fund (the ‘Fund’). The Fund vehicle was a limited partnership formed and tax resident in the British Virgin Islands (‘VC Fund LP’). The five individuals were to be the general partners in VC Fund LP.
In 2002 M who was suffering from ill health sold his interest in a thriving accountancy practice to the other two partners, C and P. Entrepreneurs’ relief was available on the gain attributable to the goodwill at the time of disposal. In 2011, M discovered that C and P had deliberately used incorrect figures to calculate the value of the goodwill.