The sale of shares in an unquoted family trading company should attract business asset taper relief of 75%. The effect of this is that the gain you make on the shares will have an effective tax rate of only 10%. To ensure this there are two basic conditions to satisfy:
The first condition is essentially a question of fact. The second one can present more problems. Issues may arise if the company starts to carry on activities beyond pure trading, for example, the company has investment property which it lets commercially. In these situations HMRC will look at the balance between trading and investment activities using a number of possible measures. If, in their view, the non trading activities account for more than 20% of the relevant measure they may take a view that the company has substantial non trading activities and could seek to deny the relief.
| Keep a watch on what is happening and consider decisions in the light of the end objective. For example, if you want to purchase a commercial property for investment it might be advisable to hold the property personally rather than in your company. Personal ownership may provide business asset taper relief on the ultimate gain. The shares in the company may not have that protection as a consequence of the company holding an investment asset. |