Business asset disposal relief on shares and securities

Produced by Tolley

The following Owner-Managed Businesses guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Business asset disposal relief on shares and securities
  • Disposals of shares or securities qualifying for business asset disposal relief
  • Material disposal of shares and securities
  • Material disposal of shares or securities in a company
  • When is a company an individual’s personal company?
  • Profits and assets test and the sale proceeds test
  • Transitional period for personal company rules
  • Relevant enterprise management incentive shares
  • Definition of a trading company
  • What are ‘trading activities’?
  • More...

Business asset disposal relief on shares and securities

Business asset disposal relief (BADR), previously known as entrepreneurs’ 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%. This relief is available on up to £1m of capital gains for each individual over their lifetime and is available on gains arising to sole traders, partners, shareholders and trusts. Prior to 11 March 2020, the lifetime limit was £10m. Relief applies to all disposals, so BADR should be considered when succession planning involves gifting business ownership, as well as in relatively straightforward sales of a business.

The general rules for BADR are detailed in the Conditions for business asset disposal relief guidance note, but this note focuses solely on the application to disposals linked to shares and securities in personal companies or disposals of enterprise management incentive (EMI) shares.

Other guidance notes relevant to BADR are:

  1. Business asset disposal relief for sole traders

  2. Business asset disposal relief for partnerships

  3. Maximising business asset disposal relief

  4. Business asset disposal relief (entrepreneurs’ relief) ― trusts

HMRC guidance can be found at CG63950P onwards and the relevant legislation is at TCGA 1992, ss 169H–169SH.

Disposals of shares or securities qualifying for business asset disposal relief

An individual may claim BADR on gains arising from shares or securities in a company provided there is a:

  1. ‘material disposal of business assets’, or

  2. an ‘associated disposal’ where an asset is disposed of which is associated with a

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