Business asset disposal relief (BADR) meaning

In this issue: Taxes management and litigation VAT Real estate taxes Oil and gas taxation Daily and weekly news alerts New and updated content Dates for your diary Trackers Useful information Taxes management and litigation FTT upholds penalties for invalid BADR claims (Cox and another v HMRC) As outlined below, in Cox and another v HMRC [2024] UKFTT 510 (TC), the First-tier Tax Tribunal (FTT) rejected the taxpayers’ appeals against penalties arising from defective entrepreneurs’ relief claims, now termed business asset disposal relief (BADR). The FTT decided the claimants failed to exercise reasonable care when making the claims, and that HMRC’s choice not to suspend the penalties was not erroneous. See News Analysis: FTT upholds penalties for invalid BADR claims (Cox and another v HMRC). VAT FTT confirms dip pot formed part of single supply of takeaway food subject to VAT (Queenscourt Limited v HMRC) As previously noted in a Tax...

The Chancellor of the Exchequer, Rachel Reeves, delivered the government’s Autumn Budget on 30 October 2024 Keenly awaited and watched, this was the first Budget from a Labour administration in fourteen years, and the first ever presented by a woman Chancellor. Many headline measures for Private Clients had been trailed in one form or another, and several of the changes—such as the Capital Gains Tax reforms—were not as draconian as many had feared, proving less severe than anticipated. It was definitely a Labour Budget, unmistakably Labour in flavour, with the Chancellor honouring election pledges not to raise income tax or National Insurance for ‘working people’, and instead securing the £40bn of tax rises by lifting employers’ National Insurance, narrowing the scope of IHT agricultural and business property reliefs, increasing CGT rates, reforming the taxation of carried interest, changing the rules for non‑UK domiciled individuals, bringing inherited pensions into the IHT net, confirming VAT on private school fees, increasing the SDLT surcharge for second homes, and even a hike in...

In this issue: Tax treatment Corporation transactions and share incentives HMRC Manuals tracker Useful information Weekly highlights from other practice areas Tax treatment Cooke v Revenue and Customs Commissioners [2024] UKFTT 272 (TC) In this matter, the First-tier Tribunal (FTT) upheld the taxpayer’s appeal regarding his qualification for entrepreneurs’ relief (now business asset disposal relief) on a £600,000 gain arising from the sale of his entire shareholding in a company. A prerequisite for the relief was that, throughout a specified period before the sale, he owned at least 5% of the company’s ordinary share capital. In reality, his holding was 4.99998%, not a full 5%. The deficit stemmed from an error caused by reliance on a spreadsheet that rounded percentage figures to two decimal places. The FTT determined, as a finding of fact, that the intention when the shares were acquired was to transfer to him no less than 5%, and no more than an amount immaterially above...

The way consideration payable for buying shares is arranged is rarely simple or linear, and can vary considerably. In many situations payment is postponed, deferred, or made conditional on a particular contingency being satisfied. Selling shareholders will look to maximise the overall price for their shares while also seeking to limit, so far as possible, any tax on disposal by: making full and efficient use of available reliefs to cut or remove any charge, and/or delaying the point in time at which any such tax becomes due However, where the consideration is deferred, the seller can become liable to tax immediately on an amount not yet received (a ‘dry’ tax charge). In calculating chargeable gains, no discount is usually allowed in respect of any consideration that is ascertainable at the date of disposal, even where it is: deferred subject to a contingency, or at risk of not being received for any reason Where any deferred...

Before disposing of a business or trade When planning a disposal, a corporate seller must choose the most suitable deal structure. Commercial drivers should lead, yet securing a tax-efficient outcome will inevitably be a key concern. The initial choice is whether to transfer: the business and its underlying assets (a business sale), or the shares in a subsidiary that holds the business and assets (a share sale) Broadly, sellers tend to prefer a share sale: it offers a straightforward exit and, where the substantial shareholdings exemption (SSE) applies, any gain is exempt from tax. An asset deal is more likely to crystallise tax charges and leaves any pre-completion tax liabilities with the seller. This Practice Note does not address individual sellers or business asset disposal relief (BADR). For more on BADR, see Practice Note: CGT—business asset disposal relief (formerly entrepreneurs' relief)...

CGT reliefs most relevant to Private Client Multiple reliefs exist to lessen or defer capital gains tax (CGT) arising on the disposals of both business and personal interests...