ICAEW.com works better with JavaScript enabled.
Exclusive content
Access to our exclusive resources is for specific groups of students, users, members and subscribers.
Q: My client had been a sole trader for many years. Twelve months ago he incorporated his sole trade into a limited company of which he was the sole shareholder and Director. He has been made an offer to sell his shares, does this mean that he would not qualify for Business Asset Disposal Relief (formerly known as Entrepreneurs Relief) as he has not owned the shares for 2 years?

A: To qualify for Business Asset Disposal Relief on a sale of shares in a company then ordinarily the shares must have been owned for a 2 year period before the disposal of the shares.

However, for share disposals made on or after 6 April 2019 the pre-incorporation period can, in certain circumstances, be taken into account when considering share ownership. The period of ownership of the sole trade or partnership business prior to the incorporation can be included as part of the taxpayer’s holding period for the shares, provided the shares were issued in exchange for the transfer of the business as a going concern, together with all the assets of the business, other than cash.

In short this means that if a transfer of the sole trade to the company qualified for Incorporation Relief (see Self Assessment helpsheet HS276) then the 2 year holding period for the shares can include the period when the trade was carried on by the individual prior to incorporation.

Disclaimer

These publications from Markel Tax were correct at the time of going to press and should be considered as principles-based guidance only. To check current validity, call the Markel Tax helpline. ICAEW (as distributor) disclaims all liability for any errors or omissions.

About Markel Tax

Markel Tax offers expert advice on UK tax and VAT via its helpline and provides monthly FAQs with questions and answers on common tax issues for businesses and practitioners.

Open AddCPD icon

Add Verified CPD Activity

Introducing AddCPD, a new way to record your CPD activities!

Log in to start using the AddCPD tool. Available only to ICAEW members.

Add this page to your CPD activity

Step 1 of 3
Download recorded
Download not recorded

Please download the related document if you wish to add this activity to your record

What time are you claiming for this activity?
Mandatory fields

Add this page to your CPD activity

Step 2 of 3
Mandatory field

Add activity to my record

Step 3 of 3
Mandatory field

Activity added

An error has occurred
Please try again

If the problem persists please contact our helpline on +44 (0)1908 248 250