Conditions for business asset disposal relief

Produced by Tolley
  • (Updated for Budget 2020)
Conditions for business asset disposal relief

The following Corporation Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Conditions for business asset disposal relief
  • Disposals qualifying for business asset disposal relief
  • Material disposals of business assets
  • What is a ‘disposal of business assets’?
  • What is a ‘material disposal’?
  • Material disposal of the whole or part of a business
  • Material disposal of an asset used at the time the business ceases to be carried on
  • Material disposal of shares or securities in a company
  • When is a company an individual’s personal company?
  • Disposal associated with a relevant material disposal
  • More...

From April 2020, entrepreneurs’ relief has been renamed ‘business asset disposal relief’.

Business asset disposal relief is a capital gains tax (CGT) relief that allows business-owners with chargeable gains on qualifying business assets to pay CGT at a rate of 10%. For disposals made on or after 11 March 2020, the relief is available on up to £1m of capital gains for each individual over their lifetime; prior to 11 March 2020, the lifetime limit was £10m. This reduction in the lifetime limit is in FA 2020 and is detailed further below. Relief is available on gains arising to sole traders, partners, shareholders and trusts. It applies to all disposals, so includes gifts and non-arm’s length sales. It is also possible to create a deemed disposal for business asset disposal relief in certain circumstances.

Introduced by Finance Act 2008, entrepreneurs’ relief (now known as business asset disposal relief) was available on disposals occurring on or after 6 April 2008. The legislation is contained at TCGA 1992, Part V, Chapters 3 and 4 and has undergone significant changes.

Disposals qualifying for business asset disposal relief

For an individual to claim business asset disposal relief, there must be a:

  1. ‘material disposal of business assets’

  2. ‘disposal of trust business assets’, or

  3. ‘disposal associated with a relevant material disposal’

TCGA 1992, s 169H(2)

Whilst the three types of qualifying disposal for business asset disposal relief all refer to disposals of business assets, the qualifying assets are different in each case. It is important from the beginning to categorise what type of disposal has been made and focus on the criteria for each.

Where the criteria for each disposal type are not met, business asset disposal relief cannot be claimed. A disposal of business assets is, in itself, not sufficient.

Qualifying disposals by sole traders, partners and trusts, a qualifying gain may also be restricted to exclude gains attributable to non-business assets. Only the gain on relevant business assets is allowable.

A material disposal may also occur without a disposal of shares. This can occur where

Popular documents