Business Asset Disposal Relief

Business owners may be able to pay less capital gains tax when they sell all or part of their business via Business Asset Disposal Relief (previously known as Entrepreneurs Relief).

Business owners may be able to pay less capital gains tax when they sell all or part of their business.  

Entrepreneurs’ Relief means you’ll pay tax at only 10% on all gains on qualifying assets rather than the higher rate of 28% under the current tax regime.

If you own most of the company you can’t get EIS or SEIS relief, but this is your alternative.

Qualification Requirements at point of sale

• You must own at least 5% of the business and associated voting rights.

• You must own owned the shares for at least one year.

• You must have been at officer or employee of the company for at least one year.

Tax Advantages

• You pay tax on only 10% on your capital gains from the sale of your shares.

• There is a lifetime limit of £1m upon which this relief can be claimed.

Warnings

• Ensure you don’t leave (employment and directorship) before the sale of your shares.

• Don’t dilute your voting rights or share capital to below 5% prior to the sale.