Business asset disposal relief (BADR) definition

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Choice of business vehicle—tax comparison table

Choice of business vehicle—tax comparison table This table compares the tax treatment of: • sole traders • partnerships (which in this table includes general partnerships, limited liability partnerships and limited partnerships), and • companies This table does not consider any reliefs or exemptions which may be available to particular taxpayers or any anti-avoidance provisions which might apply to particular circumstances. For the rates and thresholds applicable in the current tax year, see Practice Note: Key UK tax rates, thresholds and allowances. For further details about the tax treatment of each type of business vehicle, see Practice Note: Forms of business vehicle—tax summary. For further details on the choice between the types of business vehicle, see Practice Note: Tax influences on choice of business vehicle. Point of comparison Sole trader Partnership Company Tax treatment No separate taxable entity—sole trader taxed as individual with trading activity No separate taxable entity—partner taxed as individual on a notional trade representing his share of the partnership Separate taxable entity—company taxed on all...

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CGT—how to calculate a capital gain

CGT—how to calculate a capital gain Introduction A charge to capital gains tax (CGT) arises when a chargeable person makes a chargeable disposal of a chargeable asset. The disposal may produce a gain or a loss. These principles are explained in the Practice Note: Introductory guide to CGT. This Practice Note covers the general rules used to calculate whether or not an individual has made a gain or loss on the chargeable disposal of a chargeable asset. Basic CGT calculation The standard pro forma for calculating the chargeable gain on the disposal of chargeable assets from 6 April 2008 onwards is a basic calculation of the cash profit: Sale proceeds less deductions £ £ Proceeds of sale P   Less: costs of sale (C)   Subtotal   X Deduct:     Costs of acquisition (A)   Plus: enhancement expenditure (E)   Subtotal   (A+E) Chargeable gain or allowable loss   G Allowable deductions from the proceeds Deductible costs of sale are any incidental costs of...

CGT—choosing the best time for a disposal

CGT—choosing the best time for a disposal Date of disposal The date that an asset is treated as being disposed of determines the period in which the gain is subject to capital gains tax (CGT) or the loss is available to offset other gains. When the rates of CGT change, the date of disposal can also affect the rate of CGT that applies to the gain. For example, the rates of CGT changed with effect from 6 April 2016, so it is particularly important to identify the exact date of disposal for gains which fell in the 2015–16 and 2016–17 tax years. The date of disposal also affects when any CGT becomes due—this is generally by 31 January after the end of the relevant tax year in which the disposal is made. However, there are different rules applicable to disposals by non-residents and also in relation to UK residential property, as explained below. The rules for determining the date of disposal vary according to the type of...

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If an EBT trustee holds shares on bare trust for an employee, can CGT business asset disposal relief be available?

If an EBT trustee holds shares on bare trust for an employee, can CGT business asset disposal relief be available? In order for capital gains tax (CGT) business asset disposal relief (BADR) to apply, the requirements set out under sections 169H–169SH of the Taxation of Chargeable Gains Act 1992 (TCGA 1992) will need to be met. In summary, in the context of an employee's shares in their employer (which is either a trading company or the holding company in a trading group), the relevant employee will need to: • be an employee or officer of the company (or, if the company is the holding company of a trading group, of another company in its group) • hold at least 5% of the company's ordinary share capital and, by virtue of that holding, at least 5% of the company's voting rights, and • by virtue of that holding, they must also either be beneficially entitled to at least 5% of the proceeds in the event of a sale of all of...

Can an enterprise management incentives (EMI) option be immediately exercised?

Can an enterprise management incentives (EMI) option be immediately exercised? Enterprise management incentives (EMI) options may be granted under a set of EMI share option scheme rules, or by way of an EMI standalone share option agreement, as long as the agreement is written and contains the information listed in paragraph 37 of Schedule 5 Part 5 to the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003). There is no minimum period before which EMI options can be exercised (there is a maximum period of ten years in order to gain tax advantageous income tax and National Insurance contributions (NICs) treatment). However, in order to benefit from entrepreneurs' relief (ER), subject to the other legislative requirements being satisfied, a minimum qualifying period must have elapsed between the date of grant of the EMI option and the disposal of the shares. For disposals made before 6 April 2019, this minimum qualifying period is 12 months. As announced in Budget 2018, Finance Bill 2019 will include provisions...

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Share Incentives weekly highlights—28 June 2018

This week's edition of Share Incentives highlights includes: (1) the publication of HMRC's latest employment related securities bulletin, (2) News Analysis on what might be included in Finance Bill 2019, and (3) an international round-up by Mike Pewton, executive director of Solium.