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C3.1303B Business asset disposal relief (BADR)—favourable business structures

One of the issues to consider with BADR, which was known as entrepreneurs' relief before April 2020, is the best business structure for owner-managed businesses. Whilst planning opportunities are not the focus of this publication, it is useful to consider some of the relevant points.

BADR is in some ways more favourable to shareholders in limited companies and partners in partnerships than to sole traders. This is because sole traders will have to dispose of the whole or part of a business (see C3.1302C) to qualify for relief, and they do not qualify for relief on associated disposals at all (see C3.1305). Consideration therefore needs to be given to any assets held outside the business. In addition, there are no spouse or civil partner provisions in BADR and this could cause problems where assets are held jointly by a husband and wife or civil partners, but only used in a sole trade.

However, the requirement that shareholders must hold at least 5% of the shares limits