The following Owner-Managed Businesses guidance note Produced by Tolley provides comprehensive and up to date tax information covering:
This guidance note discusses the application of business asset disposal relief (BADR), previously known as entrepreneurs’ relief, for sole traders only.
See also the following guidance notes:
Conditions for business asset disposal relief
Business asset disposal relief for partnerships
Business asset disposal relief on shares and securities
Maximising business asset disposal relief
For further detail, see Simon’s Taxes C3.1302C–C3.1303A.
To be eligible for business asset disposal relief, a disposal must be:
a material disposal of business assets
an ‘associated disposal’ where an asset is disposed of which is associated with a relevant material disposal’ eg where an asset is owned personally but used for the purpose of the business carried on by a company
a disposal of trust business assets, see the Business asset disposal relief (entrepreneurs’ relief) ― trusts guidance note
TCGA 1992, s 169H
However, only the first option is applicable to sole traders. An associated disposal can only take place where there is a material disposal which consists of a disposal of an interest in a company or partnership, so the second option is not available. The third option requires that the business is owned by a trust.
For sole traders, there is a material disposal of business assets where the trader:
disposes of whole or part of their business, or
disposes of business assets on or after cessation
TCGA 1992, s 169I(2)
A disposal for these purposes is any kind of disposal that gives rise to a capital gain. BADR is not just available where the business is sold or assets of the business are sold after its cessation. A gain would also arise, for example, where the business, or part of it, is gifted to a connected person, or business assets are gifted following cessation of trade.
For sole traders, BADR is given only in respect of the disposal of relevant business assets. Relevant business assets are assets used for the purpose of the business, such as business premises and plant but not shares or other
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