Taxation of Chargeable Gains Act 1992 section 169LA

Relevant business assets: goodwill transferred to a close company etc.

Section 169LA restricts business asset disposal relief (formerly entrepreneurs' relief) on goodwill when it is transferred directly or indirectly to a close company in which the transferor retains a significant interest.

• Where a person disposes of goodwill to a close company as part of a qualifying business disposal and meets any of the personal company conditions in relation to that company (or a group member) immediately after the disposal, the goodwill is excluded from the assets eligible for business asset disposal relief.
• An exception applies where the person (and any relevant connected persons) sell all their ordinary share capital in the close company to another company within 28 days (or a longer HMRC-approved period), and end up holding less than 5% of the shares and voting rights in the acquiring company or any group member, if that acquirer is itself a close company.
• Non-UK resident companies that would qualify as close companies if they were UK resident are treated as close companies for the purposes of this restriction.
• An anti-avoidance rule ensures that if a person enters into arrangements whose main purpose is to circumvent this goodwill restriction and secure the lower tax rate on the goodwill gain, the exclusion from relief applies regardless.