CG64130 - Business Asset Disposal Relief: calculation of the relief - examples
Example 1
Example 2
Example 3
Example 4
Example 1
K ran a confectioner/tobacconist business for several years. He then sold it and made a gain of £38,000 (“relevant gains”) on the goodwill, but a loss of £8,000 (“relevant losses”) on the premises. Assuming he qualified for the relief this is applied to the net gains of £30,000.
If the disposal took place before 23 June 2010 the £30,000 would be reduced by 4/9th to £16666. This will be the “chargeable gain” and is subject to reduction by other allowable losses and the AEA.
If the disposal took place on or after 23 June 2010 the £30,000 would be the “chargeable gain” and, subject to reduction by other allowable losses and the AEA, would be charged to CGT at 10%.
The loss of £8,000 on the premises is not otherwise allowable.
Example 2
D ran a pharmacy for over 20 years until March 2011. He sold the whole business as a going concern on 31 March 2011 realising a gain £5,250,000.
D had not previously claimed the relief. The gain qualifies for relief as a disposal of whole or part of a business - see CG64015 - and he makes a claim within the relevant time limit.
As the disposal was after 23 June 2010 but before 5 April 2011 D has the maximum relief of £5,000,000 qualifying gains available, so he is entitled to the whole of his lifetime limit and will have that amount of his gain charged at a rate of 10%. The balance of the gain of £250,000 will be charged at D’s relevant rate of CGT. Assuming that D had no other gains or allowable losses during the year the calculation will be as follows:
- |
Amount |
Amount |
Amount |
---|---|---|---|
Total qualifying gain |
£5,250,000 |
- |
- |
Applicable lifetime limit |
£5,000,000 |
- |
- |
Balance of gain above limit |
- |
£250,000 |
- |
Less Annual Exempt Amount 2010-11 |
- |
£10,100 |
- |
Gains chargeable at 10% |
£5,000,000 |
- |
£500,000 |
(TCGA1992/S169N(3) |
- |
- |
- |
Gain chargeable at applicable CGT rate |
- |
£239,900 |
£67,172 |
(assume 28%) |
- |
- |
- |
CGT due |
- |
- |
£567,172 |
Example 3
E ran a landscaping business which she sold in October 2008 realising a gain of £900,000 all of which qualified for the relief (when the lifetime limit was £1m). In 2009 she started another business as a travel agent which she sold in February 2011 (lifetime limit now £5m) realising a gain of £4,500,000. E makes a second claim for relief on this second gain. It qualifies for relief but only £4,100,000 of the gains will be eligible for relief as this uses up the remaining amount of her lifetime limit (£5,000,000 - £900,000).
- |
Amount |
- |
---|---|---|
Gain 1 2008/9 qualifying gain |
£900,000 |
- |
Lifetime limit of |
£1,000,000 |
- |
Less reduction of 4/9th |
£400,000 |
- |
Chargeable gain 1 |
£500,000 |
Charged at 18% rate |
Lifetime limit remaining |
£100,000 |
- |
Increase in lifetime limit from £1m to |
- |
- |
£5m from 23 June 2010 |
£5,000,000 |
- |
Available lifetime limit |
£4,100,000 |
- |
Chargeable Gain 2 - 2011/12 |
- |
- |
Qualifying gain |
£4,500,000 |
- |
Gains reduced by available |
- |
- |
Lifetime limit relief |
£4,100,000 |
Charged at 10% rate* |
Balance of gain 2 |
£400,000 |
Charged at full CGT rate* |
Lifetime limit remaining to carry |
- |
- |
Forward to subsequent disposals until 5 April 2011: |
£0 |
- |
Lifetime limit remaining to carry forward to subsequent disposals from 6 April 2011 to 10 March 2020: |
£5,000,000 |
Lifetime limit increased to £10 million |
Lifetime limit remaining to carry forward to subsequent disposals from 10 March 2020: |
£0 |
Lifetime limit reduced to £1 million |
*Subject to any available allowable losses and AEA.
Example 4
F operated a smallholding and also operated a fruit and vegetable shop. He sold the smallholding in January 2009 realising net gains of £1,250,000 in 2008/9 and claimed the relief. This was due up to the lifetime limit that applied at that time of £1m.
F then disposed of the shop in May 2010 (lifetime limit now £2m) realising net gains of £800,000 and made a second claim for relief. This second gain all qualifies for relief as a result of the increase in the lifetime limit from £1m to £2m. Although only £800,000 of this increase has been used the balance remaining cannot be set back against the unrelieved gains on the earlier disposal, it can only be carried forward.
- |
Amount |
Amount |
Amount |
---|---|---|---|
Gain 1 2008/9 qualifying gain |
£1,250,000 |
- |
- |
Lifetime limit |
£1,000,000 |
- |
- |
Less reduction of 4/9th |
- |
£444,445 |
£555,555 |
Unrelieved part of gain 1 |
£250,000 |
- |
£250,000 |
Chargeable gain 1 |
- |
- |
£805,000* |
Lifetime limit remaining |
£0 |
- |
- |
Increase in lifetime limit from £1m to |
- |
- |
- |
£2m between 6 April and 22 June 2010 |
£1,000,000 |
- |
- |
Gain 2 2010/11 qualifying gain |
£800,000 |
- |
- |
Gains reduced by available |
- |
- |
- |
Entrepreneurs’ relief |
£1,000,000 |
- |
- |
Less reduction of 4/9th |
- |
£355,556 |
£444,444 |
Unrelieved part of gain 2 |
- |
- |
£0 |
Chargeable gain 2 |
- |
- |
£444,444* |
Lifetime limit remaining to carry forward |
- |
- |
- |
to subsequent disposals |
£200,000 |
- |
- |
Lifetime limit remaining to carry forward to subsequent disposals from 22 June 2010 to 5 April 2011: |
£3,200,000 |
- |
Lifetime limit increased to £5 million |
Lifetime limit remaining to carry forward to subsequent disposals from 6 April 2011 to 10 March 2020: |
£8,200,000 |
- |
Lifetime limit increased to £10 million |
Lifetime limit remaining to carry forward to subsequent disposals from 11 March 2020: |
£0 |
- |
Lifetime limit reduced to £1 million |
*subject to any available allowable losses and AEA.