Illustration - BADR and incorporation relief

In this lesson

1. 0:00 BADR and incorporation relief overview
2. 2:01 Automatic incorporation relief calculation
3. 3:48 Disapplying relief for BADR advantage
4. 4:59 Tax planning comparison and recommendation

About this lesson

When you transfer business assets to a company in exchange for shares, incorporation relief is automatic and defers all gains until you sell the shares later. However, if you qualify for BADR (owning the business for at least two years), you might pay less tax by electing to disapply incorporation relief and paying tax on the transfer gains immediately at 14% rather than deferring them to face 24% later. This worked example shows how Nisha's decision to disapply relief saves her £17,420 in total CGT — demonstrating why you need to calculate both scenarios before deciding. You'll see how to handle mixed asset transfers, apply annual exemptions across multiple tax years, and recognise when BADR eligibility makes the difference between a good and poor planning outcome. This is essential knowledge for Advanced Taxation (ATX) and helps you advise clients on incorporation strategy with confidence.

Duration: 6m