Business Asset Disposal Relief is the new name for Entrepreneurs Relief.
Here's your business owners' guide to eligibility and claiming.
Business Asset Disposal Relief means you’ll pay tax at 10% on all gains on qualifying assets. Business Asset Disposal Relief was known as Entrepreneurs’ Relief before 6 April 2020.
If you’re selling all or part of your business To qualify for relief, both of the following must apply for at least 2 years up to the date you sell your business:
you’re a sole trader or business partner
you’ve owned the business for at least 2 years
The same conditions apply if you’re closing your business instead. You must also dispose of your business assets within 3 years to qualify for relief.
If you’re selling shares or securities To qualify, both of the following must apply for at least 2 years up to the date you sell your shares:
you’re an employee or office holder of the company (or one in the same group)
the company’s main activities are in trading (rather than non-trading activities like investment) - or it’s the holding company of a trading group
There are also other rules depending on whether or not the shares are from an Enterprise Management Incentive (EMI).
If the shares are from an EMI You must have both:
bought the shares after 5 April 2013
been given the option to buy them at least 2 years before selling them
If the shares are not from an EMI For at least 2 years before you sell your shares, the business must be a ‘personal company’. This means that you have at least 5% of both the:
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 the number of shares you hold falls below 5% because the company has issued more shares, you may still be able to claim Business Asset Disposal Relief. You need to choose or ‘elect’ to be treated as if you had sold and re-bought your shares immediately before the new shares were issued. This will create a gain on which you can claim Business Asset Disposal Relief.
You can also choose or ‘elect’ to postpone paying tax on that gain until you come to sell your shares. You can do this by:
completing the additional information section of the Capital Gains summary form of your tax return
writing to HMRC if you do not have to complete a tax return for the year
If the company stops being a trading company If the company stops being a trading company, you can still qualify for relief if you sell your shares within 3 years. If you’re selling assets you lent to the business To qualify, both of the following must apply:
you’ve sold at least 5% of your part of a business partnership or your shares in a personal company
you owned the assets but let your business partnership or personal company use them for at least one year up to the date you sold your business or shares - or the date the business closed
If you’re a trustee You may also qualify if you’re a trustee selling assets held in the trust.
How to claim
You can claim Business Asset Disposal Relief either:
through your Self Assessment tax return
by filling in Section A of the Business Asset Disposal Relief helpsheet
There’s no limit to how many times you can claim Business Asset Disposal Relief. You can claim a total of £1 million in Business Asset Disposal Relief over your lifetime. You may be able to claim more if you sold your assets before 11 March 2020.
2021 to 2022 - claim by 31 January 2024
2020 to 2021 - claim by 31 January 2023
2019 to 2020 - claim by 31 January 2022
Your accountant will be the best person to help you. If you don't have an accountant or need to switch to a new one, get in touch with Purple Accounts Small Business Centre. We will be very happy to help.