# CG64130 - Business Asset Disposal Relief: calculation of the relief - examples

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### 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

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### 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 -
Less reduction of 4/9th £400,000 -
Chargeable gain 1 £500,000 Charged at 18% rate
Increase in lifetime limit from £1m to - -
£5m from 23 June 2010 £5,000,000 -
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 - -
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.