Exchanges involving QCBs

Deferral if no BADR?

Didn't find your answer?

Not a practical issue (at the moment) but out of idle curiosity:

Client has 'realised' a capital gain in excess of £2m on exchange of shares for QCBs. He is entitled to BADR (but will not be in future) and so has opted for s169R election. I don't think the partial BADR is an issue there (HMRC manual confirms), since 169R says that a claim for BADR may be made as if the relevant transaction were a disposal of the old asset. So, the effect of making the election, and claiming BADR, is to treat all of the shares as sold 'now' - with 10% on the first £1m, 20% on the balance.

My point of curiosity - what if none of the gain is eligible for BADR? Ordinarily one would probably choose to defer payment of the CGT. But with thoughts of significant increases in CGT rates, one might be inclined to bank the 20% rate. However, s169R is not merely an election to crystallise the gain - it is an election to claim BADR as if there had been a relevant disposal. This suggests that if there is no entitlement to BADR, a s169R election is not in point. Or am I guilty of over-analysis?

Replies (2)

Please login or register to join the discussion.

avatar
By Tax Dragon
15th Mar 2021 14:27

s169R(2) wrote:

If an election is made under this section, a claim for business asset disposal relief may be made as if the relevant transaction involved a disposal of the old asset; and if such a claim is made section 116(10) does not apply.

To add to your idle muse, what if you could claim BADR but no BADR was due? In fact I believe you can do this - e.g. to avoid higher tax charges under rules for temporary non-residence. Though there possibly the correct analysis is that your claim is invalid unless a tax charge is triggered, at which point it turns out to have been valid after all, and timeously made.

Musing aside, I don't think this 'works'. The "as if" in the middle of ss2 probably ends up meaning "you think you can do this? As if!"

(PS, thank you too for a reference to legislation.)

Thanks (0)
Replying to Tax Dragon:
avatar
By Tax Dragon
15th Mar 2021 14:37

[I know that's not technically correct. I was just going for the play on words. Technically, I think it comes down to whether "and if such a claim is made" means "and if such a claim is validly made" (which I suspect it does) and whether a claim is validly made if no BADR is in fact available (which I'm not sure about, but I suspect it's not).]

Thanks (0)