The following Corporation Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:
Business asset disposal relief (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 limit was £10m. Relief applies to all disposals, so business asset disposal relief should be considered when succession planning involves gifting business ownership, as well as in relatively straightforward sales of a business.
The general rules for business asset disposal relief 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.
An individual may claim business asset disposal relief on gains arising from shares or securities in a company provided there is a:
‘material disposal of business assets’, or
‘disposal associated with a relevant material disposal’
TCGA 1992, s 169H(2)
A disposal of trust business assets also qualifies for business asset disposal relief, but this is dealt with in the Business asset disposal relief (entrepreneurs’ relief) ― trusts guidance note.
If a disposal does not constitute either of the above, then business asset disposal relief is not available. Given that an associated disposal is contingent on there being a material disposal, it is therefore essential that the first step in ensuring availability of business asset disposal relief is that there is a material disposal. For a subsequent disposal to qualify as an associated disposal, the material disposal must be a ‘relevant material disposal’.
On a practical level, it is therefore important when planning disposals of shares and securities to consider the implications of a disposal on future disposals. It is possible for a material disposal to prevent future material disposals whilst not
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