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Where Taxpayers and Advisers Meet
Business Asset Disposal Relief: Nothing Personal
01/10/2020, by Mark McLaughlin CTA (Fellow) ATT TEP, Tax Articles - Capital Gains Tax, CGT
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Mark McLaughlin highlights a case which underlines the importance of forward planning for tax purposes and ensuring that decisions are properly documented.


A tightening of conditions for Capital Gains Tax (CGT) Entrepreneurs’ Relief (ER: now called Business Asset Disposal Relief, or BADR) in Finance Act 2019 may have resulted in some taxpayers no longer qualifying for the relief.

Personal Company

For example, an individual disposing of shares in a company is eligible to claim ER/BADR if throughout two years (increased from one year, for disposals from 6 April 2019) the company is the individual’s personal company and is a trading company (or the holding company of a trading group) and the individual is an officer or employee of the company (or a trading group member) (TCGA 1992 s 169I(6)).

The meaning of ‘personal company’ (in s 169S(3)) changed for disposals from 29 October 2018. For earlier disposals, a company is a personal company if at least 5% of the ordinary share capital is held by the individual, and at least 5% of the voting rights are exercisable by the individual by virtue of that holding.

However, Finance Act 2019 added further personal company requirements for disposals from the above date, either in terms of beneficial entitlement to at least 5% of profits available for distribution to the company’s equity holders and beneficial entitlement to at least 5% of assets available for distribution to equity holders on a winding up of the company, or alternatively that in the event of a disposal of the whole of the company’s ordinary share capital the individual would be beneficially entitled to at least 5% of the proceeds. 

Company Formalities

Some individual shareholders might not qualify for ER/BADR as a result of the above changes, and amendments to the company’s constitution may be necessary to ensure that the shares comply with the amended ‘personal company’ requirements. Furthermore, the shareholder would need to meet the conditions for at least two years prior to a disposal of their shares.

In some cases, shares may have been issued before the ER changes, which were always intended to satisfy the ER conditions. Following a sale of the company’s shares, could it be argued that the shareholder ought to be allowed ER notwithstanding the above changes, even though they would not qualify on a literal reading of the amended legislation?

Promises, Promises

In George v Revenue and Customs [2018] UKFTT 509 (TC), the taxpayer’s shares did not satisfy the personal company definition. The chairman of the company’s board of directors therefore undertook that the taxpayer’s shares would qualify for ER (i.e. by giving them voting rights). However, the company’s special resolution conferring voting rights was not made until around seven months before the company was sold (i.e. less than the minimum period for satisfying the ER conditions).

The taxpayer argued that his shares should be treated as qualifying for ER/BADR under a legal principle (i.e. an ‘equitable maxim’) based on the company chairman’s undertaking. Unfortunately for the taxpayer, this argument failed before the First-tier Tribunal.

The lesson is therefore that taxpayers should ensure that the necessary company formalities are undertaken in support of ER (or other tax) claims, and tax elections.

This article was first published in Tax Insider (April 2019) (

About The Author

Mark McLaughlin is a Fellow of the Chartered Institute of Taxation, a Fellow of the Association of Taxation Technicians, and a member of the Society of Trust and Estate Practitioners. From January 1998 until December 2018, Mark was a consultant in his own tax practice, Mark McLaughlin Associates, which provided tax consultancy and support services to professional firms throughout the UK.

He is a member of the Chartered Institute of Taxation’s Capital Gains Tax & Investment Income and Succession Taxes Sub-Committees.

Mark is editor and a co-author of HMRC Investigations Handbook (Bloomsbury Professional).

Mark is Chief Contributor to McLaughlin’s Tax Case Review, a monthly journal published by Tax Insider.

Mark is the Editor of the Core Tax Annuals (Bloomsbury Professional), and is a co-author of the ‘Inheritance Tax’ Annuals (Bloomsbury Professional).

Mark is Editor and a co-author of ‘Tax Planning’ (Bloomsbury Professional).

He is a co-author of ‘Ray & McLaughlin’s Practical IHT Planning’ (Bloomsbury Professional)

Mark is a Consultant Editor with Bloomsbury Professional, and co-author of ‘Incorporating and Disincorporating a Business’.

Mark has also written numerous articles for professional publications, including ‘Taxation’, ‘Tax Adviser’, ‘Tolley’s Practical Tax Newsletter’ and ‘Tax Journal’.

Mark is a Director of Tax Insider, and Editor of Tax Insider, Property Tax Insider and Business Tax Insider, which are monthly publications aimed at providing tax tips and tax saving ideas for taxpayers and professional advisers. He is also Editor of Tax Insider Professional, a monthly publication for professional practitioners.

Mark is also a tax lecturer, and has featured in online tax lectures for Tolley Seminars Online.

Mark co-founded TaxationWeb ( in 2002.

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