What is Business Asset Disposal Relief?
Short Answer
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.
Full Explanation
Business Asset Disposal Relief is a UK tax relief that can materially reduce the capital gains tax you pay when you sell your business.
Formerly called Entrepreneurs' Relief, it applies a reduced rate of CGT to qualifying gains up to a lifetime limit. To qualify, conditions on how long you have owned the business, the size of your shareholding, and your status as an officer or employee must be met over a defined period before the sale. Because those conditions look backwards and depend on how the business is owned and how the sale is structured — a share sale versus an asset sale, and whether a holding company sits above the trading company — BADR rewards planning ahead rather than deciding at the point of sale.
The rate, the lifetime limit and the detailed conditions are set by HMRC and change from time to time, so confirm the current position with a UK tax adviser before you commit to a structure. BADR is UK-specific; other countries have their own exit reliefs.
For the current rate, the conditions and worked figures, see our guide to business asset disposal relief. For how structure interacts with tax, see share sale vs asset sale.
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