What is business asset disposal relief?
Business asset disposal relief (BADR), previously known as entrepreneur relief, is a type of tax relief that reduces the amount of capital gains tax due on the disposal of an asset.
As an individual, if you sell all or part of your business you could qualify for BADR. BADR entitles you to a reduced rate of Capital Gains tax at 10%, rather than the standard 20%.
To qualify for BADR both of the following must apply at the date of disposal:
- You’re a sole trader or business partner
- You’ve owned the business for at least 2 years
The same conditions apply if you are closing your business, in addition to these conditions you must also dispose of the business assets within 3 years of closure to qualify.
If you are selling shares or securities you the following must apply at the date you sell your shares:
- You’re an employee of officer of the company
- The company is trading (rather than a non-trading company like investments). To qualify this can also be a holding company of a trading group
There are different rules if the shares are from and Enterprise Management Incentive (EMI).
If the shares are from an EMI you must have both:
- Bought the shares after 5th April 2013
- Been given the option to buy them at least 2 years before selling them
If the shares are not from an EMI, you must have held at least 5% of shares or voting rights for at least 2 years prior to disposal. In addition, you must also be entitled to at least 5% of either:
- Profits that are available for distribution and assets on winding up the company
- Disposal proceeds if the company is sold
If you think you might be entitled to BADR and needs some assistance, get in touch with us today.