Peter Rayney highlights six potential traps that can lead to claims for business asset disposal relief being rejected on company share sales.
Business asset disposal relief (BADR) is an important and valuable capital gains tax (CGT) relief. However, the relief conditions are such that BADR can be easily lost. Here is a selection of potential ‘traps’ for the unwary.
1. Avoid being caught out by adverse shareholder ‘dilution’
One of the key BADR conditions on share sales requires the shareholder/owner-manager to hold at least 5% of the ordinary share capital, 5% of the voting rights and 5% of the relevant economic rights (being the personal company conditions in TCGA 1992 s 169S (3)) throughout the relevant 24-month period.
Owner-managers would never expect