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Substantial: What is it?

By Mark McLaughlin, April 2021

Mark McLaughlin looks at the ‘substantial’ test for capital gains tax business asset disposal relief purposes.  

Business asset disposal relief (BADR) offers a capital gains tax (CGT) rate of 10% on net chargeable gains of up to £1 million. A claim for BADR is available on a material disposal of business assets, such as an individual’s company shares, where certain conditions are satisfied. 

Trading company? 

For an individual shareholder disposing of shares in a company, one of the common conditions for relief is that throughout a two-year period ending with the date of disposal, the company is a trading company (or the holding company of a trading group) (TCGA 1992, s 169I(6)). 

A ‘trading company’ for BADR purposes is defined as a company carrying on trading activities whose activities do not include non-trading

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