Partners or Trusts
This version of Business Asset Disposal Relief is not applicable to your disposal.
Company:
Business Asset Disposal Relief is not available to disposals made by a company.
Roll-over relief may be applicable to asset disposals.
If you are non-UK resident you are not subject to capital gains tax on the disposal of shares in a UK company unless you return to the UK within 5 years of leaving.
Where the anti-avoidance provisions apply you may be treated as being only temporarily non-resident and the effect is that income and gains assessed on a temporary non-resident of the UK are subject to UK taxes. See Non-resident Anti-avoidance rules
A different form of Business Asset Disposal Relief will apply to you.
A business means anything which is:
- A trade, profession or vocation, and is conducted on a commercial basis, with a view to the realisation of profits
- “Trade” includes any venture in the nature of trade, see Is it a trade or a business?
Investments are excluded assets for Entrepreneurs's Relief and no relief is available against any gains made on their disposal.
- An investment business is not a trade.
- A property rental business is generally an investment business.
- There are exceptions: a furnished holiday letting business is treated as a trade, a hotel or bed & breakfast business is likely to qualify as a trade due to the level of services provided.
- Business Asset Disposal Relief does not apply unless the disposal of the capital asset is accompanied by the cessation or sale of the underlying business.
- If the asset is being replaced, CGT roll-over relief may be available to defer the gain instead.
- The qualifying conditions for Business Asset Disposal Relief on the sale of assets depend on those assets being in use by the business up until the date that the business ceases or is sold.
- If 'in use' they will be included in the accounts or not otherwise disposed of.
- See Business Asset Disposal Relief for further details of qualifying conditions.
- Business Asset Disposal Relief on the sale of assets depends on those assets being in use by the business up until the time of cessation or sale of that business.
- In cases where an asset is being replaced, CGT roll-over relief may be available to defer the gain instead.
- There are other CGT reliefs however these again depend on there being an underlying business or trade, see CGT reliefs, disposal of a business or its assets
The date of disposal of CGT purposes depends on the type of disposal:
- Where a sale is agreed under an unconditional contract, the date of disposal is the date of the contract.
- If the sale contract is conditional, the disposal is the date on which it becomes legally binding.
- The disposal of a business on incorporation will usually be at the cessation of the previous business.
It appears that you have not met the qualifying ownership conditions for Business Asset Disposal Relief.
See Business Asset Disposal Relief for further information.
Investments are excluded assets as they are not classed as business assets: Business Asset Disposal Relief is not available against any gains made on their disposal.
Plant and machinery and current assets, such as stock and debtors are not asset that are subject to CGT Investments are not relevant assets for Business Asset Disposal Relief. If these are the only assets comprised in the sale, then it appears that Business Asset Disposal Relief is not applicable to this disposal.
If you have disposed of any these assets, any profit on their disposal is generally subject to income tax and not capital gains tax and therefore Business Asset Disposal Relief will not apply.
- A registered trademark is unlikely to be transferable from the trade to which it relates.
- A patent is a right and subject to income tax.
- Websites are generally expensed or capitalised as fixed assets, as they do comprise of actual coding
The date of disposal of CGT purposes depends on the type of disposal:
- Where a sale is agreed under an unconditional contract, the date of disposal is the date of the contract.
- If the sale contract is conditional, the disposal is the date on which it becomes legally binding.
- The disposal of a business on incorporation will usually be at the cessation of the previous business.
It appears that you have not met the qualifying ownership conditions for Business Asset Disposal Relief.
See Business Asset Disposal Relief for further information.
Your disposal of business assets qualifies for Business Asset Disposal Relief (BADR)..
This relief only applies to capital gains made on the disposal of chargeable business assets that can legally be separated from the business, such as:
- Land or property
- Other business assets, that are subject to capital gains tax on disposal
If the business also holds investment asset, capital gains on their disposal are not eligible for BADR.
Profits or losses on the disposal of other assets such as:
- Plant and machinery
- Stock
are calculated in the normal way, e.g.
- Plant and machinery by balancing charge or allowance in the capital allowances computation for the final accounting period.
- Sale of stock is either adjusted in the final trading accounts or any profit is brought in as a post trading receipt.
NOTE that: HMRC does not agree that goodwill can be sold as a separate asset to its underlying business and therefore BADR cannot apply to a separate asset disposal of goodwill. This VtaxP tool, is also based on that assumption.
Your disposal of business assets qualifies for Entrepreneurs' Relief.
This relief only applies to capital gains made on the disposal of chargeable business assets that can legally be separated from the business, such as:
- Land or property
- Certain intangible assets, e.g. patents, trademarks, websites (if not treated as plant and machinery)
If the business also holds investment asset, capital gains on their disposal are not eligible for Entrepreneurs' Relief.
Profits or losses on the disposal of other assets such as:
- Plant and machinery
- Stock
are calculated in the normal way, e.g.
- Plant and machinery by balancing charge or allowance in the capital allowances computation for the final accounting period.
- Sale of stock is either adjusted in the final trading accounts or any profit is brought in as a post trading receipt.
NOTE that: HMRC does not agree that goodwill can be sold as a separate asset to its underlying business and therefore Entrepreneurs' Relief cannot apply to a separate asset disposal of goodwill. This VtaxP tool, is also based on that assumption.
It appears that you have not met the qualifying ownership conditions for Entrepreneurs's Relief.
See Entrepreneurs' Relief for further information.
Your disposal of business assets qualifies for Business Asset Disposal Relief (BADR).
This relief only applies to capital gains made on the disposal of chargeable business assets that can legally be separated from the business, such as:
- Land or property
- Certain intangible assets, e.g. patents, trademarks, websites (if not treated as plant and machinery)
If the business also holds investment asset, capital gains on their disposal are not eligible for BADR.
Profits or losses on the disposal of other assets such as:
- Plant and machinery
- Stock
are calculated in the normal way, e.g.
- Plant and machinery by balancing charge or allowance in the capital allowances computation for the final accounting period.
- Sale of stock is either adjusted in the final trading accounts or any profit is brought in as a post trading receipt.
NOTE that: HMRC does not agree that goodwill can be sold as a separate asset to its underlying business and therefore Entrepreneurs' Relief cannot apply to a separate asset disposal of goodwill. This VtaxP tool, is also based on that assumption.
A business means anything which is:
- A trade, profession or vocation, and is conducted on a commercial basis, with a view to the realisation of profits
- “Trade” includes any venture in the nature of trade, see Is it a trade or a business?
Investments are excluded assets for Entrepreneurs's Relief and no relief is available against any gains made on their disposal.
- An investment business is not a trade.
- A property rental business is generally an investment business.
- There are exceptions: a furnished holiday letting business is treated as a trade, a hotel or bed & breakfast business is likely to qualify as a trade due to the level of services provided.
There are two different rules:
1. A company is close if it is UK resident and either condition A or B is met:
Condition A:
It is under the “control” of:
- Five or fewer participators, or
- Participators who are directors.
Condition B:
That five or fewer participators, or participators who are directors together possess or are entitled to acquire:
- Such rights on a notional winding up of the company, as would entitle them to receive the greater part of the assets of the company available for distribution amongst the participators, or
- Such rights as would, in that event, so entitle them if there were disregarded any rights which any of them or any other person has as a loan creditor in relation to the company or any other company.
Or
2. If a compan:
- is not resident in the United Kingdom, but
- would be a close company if it were resident in the United Kingdom
the company is to be treated as being a close company.
For full details, see What is close company?
Off-shore close company rules as amended by subsection (4) of s169L and LA TCGA 1993
The date of disposal of CGT purposes depends on the type of disposal:
- Where a sale is agreed under an unconditional contract, the date of disposal is the date of the contract.
- If the sale contract is conditional, the disposal is the date on which it becomes legally binding.
- The disposal of a business on incorporation will usually be at the cessation of the previous business.
If the sale is all or part of the business and a 'transfer of a going concern', i.e. a disposal of a live business and if VAT registered it is a VAT TOGC too, then goodwill is always expected to be one of the assets included in the sale.
For capital gains tax CGT, goodwill must be valued at current market value, even if gifted and accordingly accounted for tax. See Goodwill & incorporation: tax issues
The date of disposal of CGT purposes depends on the type of disposal:
- Where a sale is agreed under an unconditional contract, the date of disposal is the date of the contract.
- If the sale contract is conditional, the disposal is the date on which it becomes legally binding.
- The disposal of a business on incorporation will usually be at the cessation of the previous business.
Do you own any share capital in company that has purchased your business or does any relevant connected persons an interest in it?
- A connected person could be a or trust that is connected with you.
- A company is connected with another person if that person has control of it or if that person and persons connected with him have control of it.
- An individual is connected with a trust and it's trustees if they are connected to the settlor or have an interest in the trust e.g. if they are a beneficiary.
See CGT connected persons
The date of disposal of CGT purposes depends on the type of disposal:
- Where a sale is agreed under an unconditional contract, the date of disposal is the date of the contract.
- If the sale contract is conditional, the disposal is the date on which it becomes legally binding.
- The disposal of a business on incorporation will usually be at the cessation of the previous business.
The date of disposal of CGT purposes depends on the type of disposal:
- Where a sale is agreed under an unconditional contract, the date of disposal is the date of the contract.
- If the sale contract is conditional, the disposal is the date on which it becomes legally binding.
- The disposal of a business on incorporation will usually be at the cessation of the previous business.
- This 5% test applies to either nominal value or voting rights.
- Add to your holding the holdings of any relevant connected person.i.e. a company or trust that is connected with you.
- An individual is connected with a trust and it's trustees if they are connected to the settlor or have an interest in the trust e.g. if they are a beneficiary.
- See CGT connected persons
Note that this test applies to shares in the new company or in any company in the same group as the new company.
There is the anti-avoidance rule as set out in s.169L and s.169LA which says that:
(4) For the purposes of this Chapter, the goodwill is not one of the relevant business assets comprised in the qualifying business disposal.
(5) ...
(6) If a person—
(a) disposes of goodwill as part of a qualifying business disposal, and
(b) is party to relevant avoidance arrangements,
subsection (4) applies (if it would not otherwise do so).
(7) In subsection (6) “relevant avoidance arrangements” means arrangements the main purpose, or one of the main purposes, of which is to secure—
(a) that subsection (4) does not apply in relation to the goodwill,
(b)…
(8) In this section—
“arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable);
- This part of the rules deals with situations such as where you may have been asked by your buyer to incorporate your business (i.e. it wishes to buy via a new company) or you are selling on in quick succession.
- You are asked whether you have completed the sale of your incorporated company to its new buyer within 28 days.
- This 28 day period has some flexibility to ensure that there are no unintended consequences: HMRC may, by notice, allow a longer period.
There are two different rules:
1. A company is close if it is UK resident and either condition A or B is met:
Condition A:
It is under the “control” of:
- Five or fewer participators, or
- Participators who are directors.
Condition B:
That five or fewer participators, or participators who are directors together possess or are entitled to acquire:
- Such rights on a notional winding up of the company, as would entitle them to receive the greater part of the assets of the company available for distribution amongst the participators, or
- Such rights as would, in that event, so entitle them if there were disregarded any rights which any of them or any other person has as a loan creditor in relation to the company or any other company.
Or
2. If a company:
- is not resident in the United Kingdom, but
- would be a close company if it were resident in the United Kingdom
the company is to be treated as being a close company.
For full details, see What is close company?
Off-shore close company rules as amended by subsection (4) of s169L and LA TCGA 1993
It appears that you have not met the qualifying conditions for Business Asset Disposal Relief (BADR).
- BADR is not available for the disposal of goodwill to a connected company.
- As there are no other capital assets involved in this business sale, there are not other assets to that might qualify for the relief.
See
See Business Asset Disposal Relief for further information.
p> You will have retained less than a 5% interest in the buyer if:
- You (and any relevant connected person, such as another company controlled by you or a your trust in which you have an interest or where the settlor is connected to you) dispose of your entire shareholdings to another company buyer, and
- You then hold less than own less than 5% of its ordinary share capital and less than 5% of its voting rights or of any company which is a member of a group of companies of which its is a member.
For this set of rules, you additional have to be entitled to at least 5% of the voting rights, and either,
Beneficially entitled to at least 5% of the profits available for distribution and on winding up, entitled to 5% of the proceeds, or
In the event of a disposal of the entire ordinary share capital of company, entitled to at least 5% of the sale proceeds.
This applies to shares in the new company or in any company in the same group as the new company.
- Add to your holding the holdings of any connected person.
- This test applies to shares in the new company or in any company in the same group as the new company.
There is the anti-avoidance rule as set out in s.169L and s.169LA which says that:
(4) For the purposes of this Chapter, the goodwill is not one of the relevant business assets comprised in the qualifying business disposal.
(5) ...
(6) If a person—
(a) disposes of goodwill as part of a qualifying business disposal, and
(b) is party to relevant avoidance arrangements,
subsection (4) applies (if it would not otherwise do so).
(7) In subsection (6) “relevant avoidance arrangements” means arrangements the main purpose, or one of the main purposes, of which is to secure—
(a) that subsection (4) does not apply in relation to the goodwill,
(b)…
(8) In this section—
“arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable);
The date of disposal of CGT purposes depends on the type of disposal:
- Where a sale is agreed under an unconditional contract, the date of disposal is the date of the contract.
- If the sale contract is conditional, the disposal is the date on which it becomes legally binding.
- The disposal of a business on incorporation will usually be at the cessation of the previous business.
The date of disposal of CGT purposes depends on the type of disposal:
- Where a sale is agreed under an unconditional contract, the date of disposal is the date of the contract.
- If the sale contract is conditional, the disposal is the date on which it becomes legally binding.
- The disposal of a business on incorporation will usually be at the cessation of the previous business.
- This part of the rules deals with situations such as where you may have been asked by your buyer to incorporate your business (i.e. it wishes to buy via a new company) or you are selling on in quick succession.
- You are asked whether you have completed the sale of your incorporated company to its new buyer within 28 days.
- This 28 day period has some flexibility to ensure that there are no unintended consequences: HMRC may, by notice, allow a longer period.
There are two different rules:
1. A company is close if it is UK resident and either condition A or B is met:
Condition A:
It is under the “control” of:
- Five or fewer participators, or
- Participators who are directors.
Condition B:
That five or fewer participators, or participators who are directors together possess or are entitled to acquire:
- Such rights on a notional winding up of the company, as would entitle them to receive the greater part of the assets of the company available for distribution amongst the participators, or
- Such rights as would, in that event, so entitle them if there were disregarded any rights which any of them or any other person has as a loan creditor in relation to the company or any other company.
Or
2. If a company:
- is not resident in the United Kingdom, but
- would be a close company if it were resident in the United Kingdom
the company is to be treated as being a close company.
For full details, see What is close company?
Off-shore close company rules as amended by subsection (4) of s169L and LA TCGA 1993
p> You will have retained less than a 5% interest in the buyer if:
- You (and any relevant connected person, such as another company controlled by you or your trust) dispose of your entire shareholdings to another company buyer, and
- You then hold less than own less than 5% of its ordinary share capital and less than 5% of its voting rights or of any company which is a member of a group of companies of which its is a member.
The date of disposal of CGT purposes depends on the type of disposal:
- Where a sale is agreed under an unconditional contract, the date of disposal is the date of the contract.
- If the sale contract is conditional, the disposal is the date on which it becomes legally binding.
- The disposal of a business on incorporation will usually be at the cessation of the previous business.
The date of disposal of CGT purposes depends on the type of disposal:
- Where a sale is agreed under an unconditional contract, the date of disposal is the date of the contract.
- If the sale contract is conditional, the disposal is the date on which it becomes legally binding.
- The disposal of a business on incorporation will usually be at the cessation of the previous business.
It appears that your business disposal will qualify for Business Asset Disposal Relief (BADR).
The relief on the disposal of the whole or part of a business applies to capital gains made on the disposal its relevant business assets for capital gains tax which may comprise of:
- Freehold or leasehold interests in business land or property
- Goodwill e.g. trading name, customer lists, reputation
If the business also holds investment assets, capital gains on their disposal do not qualify for subject to BADR.
Profits or losses on the disposal of other assets such as:
- Plant and machinery
- Stock
- Other current assets
are calculated in the normal way, e.g.
- Plant and machinery by balancing charge or allowance in the capital allowances computation for the final accounting period.
- Sale of stock is either adjusted in the final trading accounts or any profit is brought in as a post trading receipt.
The amount of BADR given depends on the amount of the individual's BARD Lifetime Allowance after taking previous disposals into account at the date of the disposal.
The Lifetime Allowance is as follows:
- £1 million from 11 March 2020.
- £10 million from 6 April 2011 £5 million from 23 June 2010.
- £2 million from 6 April 2010 to 22 June 2010.
See Business Asset Disposal Relief for further details of the lifetime allowance and example calculations.
It appears that you have partly met the qualifying conditions for Business Asset Disposal Relief (BADR).
- BADR is not available for the disposal of goodwill to a connected company.
- The relief should be available on the disposal of any other capital assets involved in this business sale, typically these will be land and property.
Goodwill is not defined for the purposes of this relief and it is noted that HMRC's view tends to be that intangible assets of the trade are goodwill. Contentious cases need to be decided on their merits.
Do also be aware of the general anti-avoidance rules 'GAAR', if you are using tax planning schemes.
The amount of BADR given depends on the amount of the individual's BADR Lifetime Allowance after taking previous disposals into account at the date of the disposal.
The Lifetime Allowance is as follows:
- £1 million from 11 March 2020.
- £10 million from 6 April 2011 £5 million from 23 June 2010.
- £2 million from 6 April 2010 to 22 June 2010.
See Business Asset Disposal Relief and Goodwill and incorporation for further information.
It appears that you have not met the qualifying ownership conditions for Business Asset Disposal Relief (BADR).
See Business Asset Disposal Relief for further information.
It appears that you have not met the qualifying conditions for Business Asset Disposal Relief (BADR).
- BADR is not available for the disposal of goodwill to a connected company.
- As there are no other capital assets involved in this business sale, there are not other assets to that might qualify for the relief.
See
See Business Asset Disposal Relief for further information.
