Illustration - disapplication of paper for paper

In this lesson

1. 0:00 Paper for paper relief in takeovers
2. 1:51 Standard treatment without relief
3. 3:40 Disapplying relief for tax efficiency
4. 5:37 Key exam tips and conclusion

About this lesson

This technique is particularly relevant when a shareholder's stake in a private company is exchanged for shares in a public company, making Business Asset Disposal Relief (BADR) unavailable after the takeover. The video walks through a complete worked example showing Mark's position following ABC Limited's takeover by XYZ plc. You'll see how to calculate the capital gains tax under the standard paper for paper treatment, then compare it to the position if Mark elects to disapply the relief. The key insight is recognising that by treating the takeover as a chargeable disposal at the lower BADR rate (14%), followed by a separate disposal of the new shares at the standard rate (20%), Mark can save £40,000 in tax compared to the standard approach. This technique appears in TX (Taxation) and is essential for anyone advising on corporate transactions. You'll learn to spot the conditions that make disapplication worthwhile: when BADR won't apply after the takeover because the shareholder's new stake falls below 5%, or they're no longer an employee of the acquiring company. By the end of this lesson, you'll be confident identifying these scenarios and calculating the tax-efficient position.

Duration: 6m