A crucial area that I expect to feature in the forthcoming June 2022 Advanced Tax and Tax exams is Business Asset Disposal Relief (BAD relief)
This is simply the new revised entrepreneur’s relief. It is available on the sale of a sole trader or partnership business assets (usually buildings and goodwill) as long as the business has been owned for 2 years and a substantial business disposal takes place. This usually means that the sole trader or partner will cease trading.
BAD Relief is also available on both quoted and unquoted shares as long as the individual owns at least 5% OSC and has been employed by the company for at least 2 years.
There is a lifetime limit of £1M and the gain eligible for BAD Relief consumes the basic rate band so other gains in the same tax year will be taxed at either 20% or 28%
BAD Relief is only relevant when computing the tax after the deduction of the annual exemption.
The way to remember BAD relief is to think of the pop superstar whose legendary song of the same name made the word part of the common vernacular.
So, just remember Michael Jackson and remember to tax individual’s business gains up to £1M at 10%.
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