Thinking of selling your business?

Business Asset Disposal Relief (BADR) applies to the sale of a business, shares in a trading company or an individual’s interest in a trading partnership. When the relief is available, Capital Gains Tax (CGT) of 10% is payable in place of the standard rate.

This can mean a substantial CGT saving for someone looking to exit their business. You can currently claim a total of £1 million in BADR over your lifetime.

Qualifying conditions

To qualify for BADR, certain conditions must be met for at least two years leading up to the date of disposal. For sole traders and partners, you must have owned the business for this period. For company shareholders, the company must be a trading company, you must hold at least 5% of the ordinary share capital and voting rights, and you must be an employee or office holder of the company.

Structuring the sale

The way a sale is structured can impact your eligibility for BADR. For example, if you retain some shares or continue to be involved in the business in a consultancy capacity, it is vital to ensure these arrangements do not jeopardise the relief. Timing is also critical; selling assets piece-meal rather than as a single going concern can lead to complications.

Planning ahead

Given the strict qualifying conditions, planning for a business exit should ideally begin years in advance. This ensures that any necessary restructuring can take place well before a sale is agreed, maximising your chances of securing the 10% tax rate. If you are considering selling your business, seeking professional tax advice early in the process is essential.