CG64130 - Business Asset Disposal Relief: calculation of the relief - examples
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.
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:
|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|
|Gain chargeable at applicable CGT rate||-||£239,900||£67,172|
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).
|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||-||-|
|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.
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.
|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||-||-||-|
|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.