Can I claim Business Asset Disposal relief on the sale of the property?

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    Q. My wife and I are director/shareholders on our own company. I own 65% of the ordinary share capital and my wife owns 35%. I also personally own the property from which the business is being run. I am getting to retirement age and now wish to sell the property and the business will continue but being run from rented premises. At the same time, I want to give between 5% and 10% of my shares to my adult son who will take over from me in running the business. What will be my tax position? Can I claim Business Asset Disposal relief on the sale of the property?

     

    A: Business Asset Disposal Relief can be claimed on the disposal of the shares but also on the associated disposal of any assets used in or by the company. This can include the business premises used by the business but personally owned by a director, as in this case.

    The main condition that needs to be satisfied is that for at least two years ending on the date of disposal the shareholder must be beneficially entitled to:

    at least 5% of both the company’s profits available for distribution to ‘equity holders’ and the company’s assets available for distribution on a winding up and/or
    at least 5% of the proceeds of sale in the event of a disposal of the whole of the company’s ordinary share capital.
    In your case in order to meet the 5% test, you would have to make a minimum disposal of 7.7% of your holding (65% x 7.7% = 5%). A disposal of 5% of your holding would mean disposal of only a 3.25% stake (65% x 5%) and, as such, the 5% test would not be satisfied and Business Asset Disposal Relief cannot be claimed on either the sale of the shares or of the property.

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