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BADR - Holding company 2 years old?

Ltd company 6 years old, holding company 4 months, same owners, can BADR be claimed?

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Hi. My business has been owned by my wife and I for 6 years, 4 months ago we setup a holding company for the Ltd company, if we want to now sell the Ltd company and dispose of the holding company would we have to wait 2 years before disposing of the holding company to be able to claim BADR? Any advise would be much appreciated.

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By Mr_awol
21st Jun 2021 11:37

The best person to ask would be the one that set up the holding company for you, as they will have far more information that you have provided here (some of that info will be relevant, much of it not, but nevertheless they will have it).

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By paul.benny
21st Jun 2021 15:08

+1

Presumably there was some rationale at the time for establishing the holdco. Were you not contemplating sale of tradingco at the time?

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By sjadh
21st Jun 2021 15:17

The holding company was setup to move to profits to, to try and protect shareholders funds. We weren't planning to sell at the time but things have changed. We're unclear if the holding company would need to be 2 years old before we can take BADR. Thanks

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Replying to sjadh:
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By Tax Dragon
21st Jun 2021 15:27

sjadh wrote:

The holding company was setup to move to profits to, to try and protect shareholders funds. We weren't planning to sell at the time but things have changed. We're unclear if the holding company would need to be 2 years old before we can take BADR. Thanks

If you didn't get HMRC clearance, BADR might not be that relevant.

One reason (of many) why the answers you have already had are the best answers you are going to get here.

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Replying to Tax Dragon:
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By sjadh
21st Jun 2021 15:37

My accountant setup the holding company but isn't experienced in selling businesses / BADR so I thought I would ask here but from the responses so far its seeming like this isn't a simple black and white answer like I thought it would be

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By The Dullard
21st Jun 2021 15:43

Your accounant should have considered the BADR (/ER) issue at the time of setting up the holding company. If it was done correctly, there would have been a conversation related to BADR (/ER) that you should have had. Was 169Q mentioned to you at all?

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Replying to The Dullard:
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By Dib
21st Jun 2021 17:05

Why would a s169Q election be beneficial? Assuming this was just a straight share for share, the new holding would potentially qualify for BADR as comprising shares in the holding company of a trading group

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Replying to Dib:
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By Tax Dragon
21st Jun 2021 17:43

As the OP noted, the answer to the question asked depends on the facts. It's possible that BADR is due on the new shares. It's possible it's not. If it's not, it's possible that s169Q could be of use.

As Awol noted, the best person for the OP to ask about all this stuff would be the person that set up the holding company, as they have the relevant information.

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Replying to Tax Dragon:
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By The Dullard
21st Jun 2021 18:15

I don't see s 169Q helping if BADR wouldn't now be due.

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Replying to Dib:
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By The Dullard
21st Jun 2021 18:22

I never said a s 169Q election would be beneficial. Just that it would hopefully have been discussed.

The reason it should have been discussed is because legislation can, and does, change. One might make the election, for example, if one didn't anticipate BADR/ER remaining on the statute book, for example, and wanted to "bank" the relief. I've recently had such a discussion.

It's non-discussion might point to there not having been a share for share exchange, and, therefore, potentially a clusterfuch.

Incidentally, if you had somebody that put a holding company above a trading company in February 2020 when it was worth £12 million and expecting to sell it in 2021 for £15 million, a s 169Q election would have been a very useful way to have banked ER on an extra £9 million compared to no s 169Q election.

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By paul.benny
22nd Jun 2021 09:11

Sounds like you need a different accountant that knows what they are doing. I'm still not sure (partly because of the sketchy facts) what setting up a holdco would achieve, still less that it would do what you said.

If sale of a business is beyond your accountant's skill or experience, fair enough. But s/he should at least direct you to someone who is competent to advise.

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