Business Asset Disposal Relief
Definition
Business Asset Disposal Relief (BADR), formerly Entrepreneurs' Relief, is a UK capital gains tax relief that reduces the rate of CGT on qualifying gains when an individual sells all or part of a trading business. It applies a reduced CGT rate on gains up to a lifetime limit, provided conditions on ownership period, shareholding and officer or employee status are met in the period before disposal. Because the qualifying conditions look back over a defined period and depend on how the sale is structured — a share sale versus an asset sale, and how any holding company sits above the trading company — BADR is a reason to plan an exit well ahead rather than at the point of sale. The rate, lifetime limit and conditions are set by HMRC and change from time to time, so an owner should confirm the current rules with a tax adviser. BADR applies only in the UK; other jurisdictions have their own exit reliefs.
Complementary Terms
Concepts that frequently appear alongside Business Asset Disposal Relief in practice.
The planned method by which founders or investors intend to realise the value of their investment. Common exit routes include trade sale (acquisition), IPO, secondary sale, or management buyout.
The sale of a company to a strategic buyer, typically another company in the same or adjacent industry. Trade sales are the most common exit route for venture-backed and private equity-backed businesses and often command premium valuations due to strategic synergies.
A portion of the purchase price in an acquisition that is payable at a future date, either as a fixed amount or contingent on the achievement of specified milestones. Deferred consideration must be recognised at fair value at the acquisition date under IFRS 3 and ASC 805, with subsequent changes in value typically recorded through profit or loss.
A transaction in which a company's existing management team acquires the business, often with financial backing from private equity or debt providers. MBOs are a common succession and exit route, particularly for founder-led or family-owned businesses.
Further Reading
Share Sale vs Asset Sale: Structure and Tax (UK)
How deal structure affects BADR and your after-tax proceeds.
Read more →Related FAQ
How much does it cost to sell a business?
Expect adviser or broker fees, legal fees and, often, tax on the gain. Fees vary widely by deal size and complexity; larger deals typically pay a corporate finance adviser a success fee plus legal costs.
Read full answer →What is the difference between a share sale and an asset sale?
In a share sale the buyer acquires the company itself, including its liabilities; in an asset sale the buyer acquires specified assets and leaves most liabilities behind. The choice has major tax and risk consequences.
Read full answer →What is Business Asset Disposal Relief?
Business Asset Disposal Relief (BADR), formerly Entrepreneurs' Relief, is a UK capital gains tax relief that reduces the CGT rate on qualifying gains when you sell a trading business, up to a lifetime limit, subject to conditions.
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