Does BADR period reset if share holding increases

[Pigsfoot1]

Hi,

I have a plan to sell my business in 1-2 years time. There are 4 share holders, myself and my business partner and our partners. At the time of writing none of us are married.

We all hold more than 5% shares and have done now for around 3-4 years but myself and my business partner have sold a previous business so our BADR allowance is all used up.

I ( we ) am planning on getting married next year and at that stage i was going to transfer majority of my share's to my then wife. What i'm unsure of is when i transfer my shares does the 2 year min time limit reset or does it continue ( or even split between share holdings ). i.e. if we have had the shares for 3 years already and sell in 1 years is it technically 4 years that she has had shares or are some 3 years and others 1 year etc

Obviously i don't want to get this wrong as the tax element makes a huge difference. I appreciate some of you will be saying speak to my accountant but they are a customer and i don't want to raise any alarm bells at this stage.

If the answer isn't quite straight forward then i'll pay to see a independent specialist that has nothing to do with the existing business but some guidance from you guys would be appreciated.

 

[Lisa Thomas]

I can recommend an accountant who can advise if you don't find one on here, and want to avoid asking your existing accountant.

 

[Daybooks]

If you are referring to life time allowance then unless you know of a way to reset this then its natural definition would apply.

Try:

HS275 Business Asset Disposal Relief (2025)

www.gov.uk

If you can reset it then consider any of the creative industry or research and development reliefs available - just for starters……

 

[Pigsfoot1]

If you are referring to life time allowance then unless you know of a way to reset this then its natural definition would apply.


If you can reset it then consider any of the creative industry or research and development reliefs available - just for starters……

No, i am not referring to the life time allowance. I am referring to the 2 year period in which you have to hold shares before you can use the BADR

 

[Daybooks]

No, i am not referring to the life time allowance. I am referring to the 2 year period in which you have to hold shares before you can use the BADR

Okay, the guidance also includes a section on spouses so a careful read of that is needed.

It suggests each is treated separately which I think is telling.

 

[Pigsfoot1]

Okay, the guidance also includes a section on spouses so a careful read of that is needed.

It suggests each is treated separately which I think is telling.

Thanks you for your reply but i am after a specific area of advice. I am fully aware how BADR works, as i have said i have already used it myself. My question is regarding the transfer of shares between husband and wife and if the person receiving the shares i.e. my wife... does that reset the two year timeline before SHE can use BADR.

 

[Daybooks]

Thanks you for your reply but i am after a specific area of advice. I am fully aware how BADR works, as i have said i have already used it myself. My question is regarding the transfer of shares between husband and wife and if the person receiving the shares i.e. my wife... does that reset the two year timeline before SHE can use BADR.

The guidance nor legislation will explore every avenue.

However the reference I made to spouses being treated as separate individuals I believe answers your question.

BADR belongs to the individual who has to meet the conditions. I believe the spouse as an individual has entitlement at the date of transfer and not before. That is how I interpret this. If there is a clause that allows the date of ownership to inherit your date of ownership I haven’t seen it. Doesn’t mean it does not exist.

Notwithstanding there are other conditions that have to be satisfied which only you can determine are fulfilled during the qualifying period.

Am sure a solicitor will take your money and argue your case that it should be backdated; which they can demonstrably do by showing us the legislation or case law that allows it.

 

[UK Contractor Accountant]

If shares are transferred to a spouse or a civil partner to secure no-gain / no-loss treatment on the transfer, then if the transferee has already met the BADR qualifying criteria for two years (that is, broadly, for the last two years they have (a) owned at least 5% of the company and (b) been an officer or employee), shares which are newly transferred to them will qualify for BADR. The transferred shares themselves do not need to have been held for two years in order to qualify. However, if the transferee has not already met the BADR conditions on their existing shareholding for at least two years, this technique will not secure BADR unless it can be done two years or more before the shares are sold.