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Business Asset Disposal Relief Eligibility
BADR is available on lifetime gains of up to £1 million.A trading condition must be met for sales and so any non-trading activities (property investment, for instance) would be likely to taint the company’s qualifying status for BADR purposes. A separate company should be established to hold the investment activities; however, be aware, if more than one business is run through one limited company, and one trade or division is sold rather than all the company’s shares, any resulting gain would be subject to corporation tax at 19% without any preliminary and more complicated tax planning measures.
There are several other tax consequences of running multiple businesses under one limited company. For example, tax relief is obtained for losses. Where businesses are run through separate companies, companies must claim and surrender ‘group relief’ where there are losses in one or more group companies and profits in others. Depending on the amount and type of profit/loss involved, profits may not be able to be reduced by loss. For a single company with multiple businesses, loss relief is simpler and more efficient.
There are likely to be legal, practical, and commercial factors for contractors to consider. For instance, it may be cheaper and simpler to operate a single multi-trade company as there will be fewer reporting and administrative requirements. However, there may be legal, regulatory, or commercial constraints which dictate that separate companies are required for each business. For example, if any of the businesses are commercially ‘high risk,’ then it would usually be advisable to run it through a separate legal entity. Otherwise, in the event of the high-risk business failing, the assets of a multi-business company are at risk of being required to repay the failing business’s creditors. A final consideration is that, if it is decided that different businesses should be run from separate companies, there is then the question of whether to insert a group holding company to own the various subsidiaries, or whether the individual shareholder should own the companies directly.
In conclusion, there are many factors to consider, and expert advice is advised, ideally before taking any action. This will help to avoid costly or time-consuming mistakes. As award winning accounting professionals, our team understands how you operate and the importance of providing a transparent service that offers complete peace of mind and assurance that you're never alone. Get in touch to find out more about our Limited Company Service.