Business asset disposal relief (previously known as entrepreneurs’ relief)

Produced by Tolley

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

  • Business asset disposal relief (previously known as entrepreneurs’ relief)
  • Introduction
  • Material disposal of business assets
  • Definition of ‘business asset’
  • Definition of ‘material disposal’
  • Enterprise management incentive shares
  • Goodwill
  • Dilution of shareholding
  • Definition of a ‘trading company’
  • Trading activities
  • More...

Business asset disposal relief (which may also be referred to as BADR) is a capital gains tax (CGT) relief available to taxpayers who make a qualifying business disposal (essentially selling or giving away their business). 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.

Prior to 6 April 2020, business asset disposal relief was known as entrepreneurs’ relief. Strictly, any reference to the relief before 6 April 2020 in the commentary below should use the term entrepreneurs’ relief, however to avoid confusion, the term business asset disposal relief has been used throughout.

Business asset disposal relief is a key relief in many business scenarios. To read about it in the context of some common types of transactions, see the following guidance notes:

  1. Rollover relief

  2. Business asset gift relief ― restrictions

  3. Capital gains tax implications of incorporation

  4. Tax implications of share sale

  5. Tax implications of trade and asset sale

  6. Takeovers

  7. Loan notes and Qualifying Corporate Bonds (QCBs) and non-QCBs

  8. Tax treatment of earn-outs and deferred consideration

  9. Enterprise investment scheme deferral relief

  10. Informal winding up

In most instances, business asset disposal relief will be available to:

  1. sole traders and partners selling / gifting the whole or part of their businesses (furnished holiday lettings are also included)

  2. company directors and employees holding at least 5% of the ordinary shares and voting rights in a ‘qualifying company’ who sell / gift all or part of their shareholding

Qualifying gains arising from 23 June 2010 are taxed at a flat rate of 10%.

The computational aspects are discussed below.

When calculating the capital gain or loss on the disposal of land or buildings used in the business, you should consider the HMRC ‘Capital gains tax for land and buildings’ toolkit. The aim of the toolkit is to help identify the key risks for the CGT

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