Email David Kirk direct by clicking on his name.

What Is Entrepreneurs Relief And How Do I Get It?

The quick answer

Business Asset Disposal Relief (formerly Entrepreneurs’ Relief) is a Capital Gains Tax relief that means you only pay 10% Capital Gains Tax on the first £1m of gains on the sale of qualifying business assets.

This can include share sales, buy backs or distributions of reserves via a Members Voluntary Liquidation. You need a Licensed Insolvency Practitioner like us to do a solvent liquidation.

In more detail

HOW TO QUALIFY FOR BUSINESS ASSET DISPOSAL RELIEF

Capital gains are taxed at either 28% or 20% if you are a higher rate taxpayer, 18% if you are a basic rate taxpayer or 10% if the gain meets certain qualifying conditions and qualifies for Business Asset Disposal Relief.

The tax conditions to qualify are as follows:

  • The assets must have been trading assets.
  • If they are shares in a limited company it must have been a trading limited company.
  • It must have been trading within the last three years (so be careful of leaving a company dormant for three years).
  • For a limited company, you must have owned 5% of the ordinary voting shares.
  • There is a lifetime limit of £1 million on capital gains. Above that level in a lifetime the tax rate will revert to 20%. This is often the level considered for emigration to avoid Capital Gains Tax.
  • Some trades do not qualify; for example property-owning and letting in a limited company does not usually qualify as trading so careful advice needs to be taken beforehand from a suitably qualified professional.
  • For companies with assets below £25,000 in reserves, Extra Statutory Concession C16 can be used. This is an informal type of liquidation where you do not need to use a Licensed Insolvency Practitioner and can deal with the distribution and closure of a company by yourself.

Final Advice

You should always take professional advice before starting a member’s voluntary liquidation and it is normal as well to ask for tax clearance from HM Revenue and Customs on any larger or more complex transactions. You can view the latest guidance from HMRC to keep up with any updates as they happen.

Author: David Kirk
Everything you need can be done online.
We cover all of England and Wales.

tip

If you need insolvency advice the earlier you talk to someone like us the better as you will have more options. We can help, contact us today.

More questions in this section

Author: David Kirk - ACA FABRP
Everything you need can be done online.
No need to meet anyone in person.
We cover all of England and Wales.
Just a quick email to say a heartfelt thank you for your very calm, considered, expert advice regarding my circumstances on Tuesday. Things looked bleak before you explained my options much more clearly, in simple layman’s terms.
Rob Elliott (14th December 2021)

Menu

Newsletter

Sign up to our newsletter

Request a callback

Simply fill out the short form below and I will get back to you.

David Kirk Portrait

David Kirk

Licensed Insolvency Practitioner