The recent tax case of Kavanagh v HMRC has highlighted the importance of ensuring that the relevant qualifying conditions are met to access valuable tax reliefs.

Business Asset Disposal Relief “BAD Relief” (formerly Entrepreneurs’ Relief) provides that on the disposal of certain assets, a 10% Capital Gains Tax rate can be obtained (as opposed to a general 20% CGT rate), subject to a lifetime limit per individual of up to £1m – under current rates, potentially therefore providing a maximum £100,000 tax saving.

Broadly speaking, for the sale of shares, BAD Relief can be claimed where, throughout the period of 24 months immediately leading up to the sale, the seller meets the following conditions:

• Holds at least 5% of the ordinary share capital of the company giving at least 5% of the voting rights in the company;
• Be entitled to at least 5% of either;
• The profits that are available for distribution and assets on winding up the company;

• The disposal proceeds of the company if it is sold. 

• Be an officer or employee of the company.