Business Asset Disposal Relief

You must own at least 5% of the ordinary share capital AND voting rights to qualify for BADR. If you've diluted your shareholding by taking on investors or giving shares to family members, you may have fallen below this threshold. Speak to a tax adviser before proceeding.

The 2-year ownership rule is strict. If you haven't owned the business for a full 2 years up to the date of sale, you won't qualify. Note: business restructuring (e.g., converting from sole trader to limited company) can reset this clock.

You must be an officer (director) or employee of the company right up to the point of sale. If you've already stepped down, retired, or gone part-time, this could disqualify you from claiming BADR.

Resigning or retiring before the sale completes is a common mistake. Even if you plan to hand over gradually, you must remain formally in your role until the transaction is finished.

BADR is for when you sell or close the business, not for selling individual assets at a later date. All qualifying assets should be disposed of together or within a reasonable timeframe of the business sale.

If you keep assets to sell later (especially property or equipment), those sales may not qualify for BADR. The relief is intended for assets disposed of as part of the business cessation.

If your company has built up large cash balances or holds significant investments unrelated to its trade, HMRC may argue it's no longer "mainly a trading company." This could disqualify the entire claim.

Holding excessive cash reserves or non-trading investments can jeopardise your claim. Consider whether surplus funds could be distributed or used for business purposes before the sale.

If the property isn't genuinely used for the trade, it may not qualify as a business asset. Ensure there's a clear business purpose for the premises.

If you charge full market rent to your business for property you own personally, HMRC may treat the property as an investment rather than a business asset. This is a common and costly mistake.

Changing from sole trader to partnership or limited company, swapping share classes, or restructuring can restart the 2-year qualifying period. If you've made recent changes, you may need to wait before selling.

If the 2-year period hasn't been met since the last qualifying change, you'll need to delay the sale or accept that BADR may not be available.

Once you've signed sale documents or stepped down from your role, it may be too late to fix BADR issues. Always verify eligibility before making any commitments.

BADR rules are complex and the stakes are high. Professional confirmation before the sale gives you certainty and time to address any issues. Don't assume your accountant will "sort it later."