CG64174 - Business Asset Disposal Relief: rates from April 2025 and from April 2026: anti-forestalling rule: unconditional contracts
Source: gov.uk (2025-03-17)


Throughout this manual, all legislative references are to Taxation of Chargeable Gains Act 1992 (https://www.legislation.gov.uk/ukpga/1992/12/contents) (“TCGA92”) unless otherwise stated.

As set out at CG63955 (https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg63955), where Business Asset Disposal Relief (BADR) applies to a disposal made on or after 6 April 2025 but before 6 April 2026, all or part of it is charged to CGT at a rate of 14%. Where BADR applies to disposals falling on or after 6 April 2026, the rate applying is 18%.

CG10249 (https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg10249) gives an overview of the anti-forestalling rules applying to the various changes to Capital Gains Tax announced at Budget 2024. CG10250 (https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg10250) provides further detail on the rule applying to unconditional contracts.

The rules being introduced maintain the date of disposal for the contract but apply the new BADR rates to these disposals unless the parties to the contract can demonstrate that the contract is an “excluded contract”:
- that they did not enter into the contract with a purpose of obtaining a tax advantage by reason of the timing rule in section 28 (https://www.legislation.gov.uk/ukpga/1992/12/section/28), and
- where the parties to the contract are connected, that the contract was entered into wholly for commercial reasons.
The provision addresses the sort of arrangement shown in the examples below. Where a contract is put in place with an entity where there is no intention of completing until a ‘genuine’ buyer is found, or where it was put in place in order to lock in the lower rate applying to BADR prior to a rate change day.

6 April 2025 to 5 April 2026

Where an unconditional contract is entered into on or after 30 October 2024 but before 6 April 2025, and completes on or after 6 April 2025, the anti-forestalling rules will apply such that the date of disposal will be the date the contract completes, unless a claim to disapply the rule is made or the total gains on all excluded contracts is not more than £100,000.

6 April 2026 onwards

Where an unconditional contract is entered into in the tax year 2025/26, and completes on or after 6 April 2026, the anti-forestalling rules will apply such that the date of the disposal will be the date the contract completes, unless a claim to disapply the rule is made or the total gains on all excluded contracts is not more than £100,000.

Example - 6 April 2025 to 5 April 2026

Sarah owns all the shares in Green Ltd that are standing at a considerable gain and would qualify for BADR. She has no immediate intention of selling the shares but in February 2025 is made aware that on 6 April 2025 the rate of BADR will increase to 14%. She was advised to set up a separate company, Yellow Ltd, and enter into an agreement to sell her shares to that company for their market value at the time the contract is completed.

The purpose of Yellow Ltd is to take advantage of the lower rate of BADR at 10% pre-6 April 2025. This would be achieved when a third party approaches Sarah to buy her shares in Green Ltd. At this point, Sarah would complete the contract with Yellow Ltd and the third party will then buy the shares for Green Ltd. The rule in section 28 (https://www.legislation.gov.uk/ukpga/1992/12/section/28) means that the disposal to Green Ltd is treated as taking place in February 2025, before the BADR rate is increased.

The anti-forestalling rules mean that where an unconditional contract is entered into on or after 30 October 2014, but before 6 April 2025, and is completed after 6 April 2025 then, for the purposes of determining the appliable rates only, the disposal will be treated as taking place at the date of completion and not the date of the contract. This includes conditional contracts where conditions were satisfied before 6 April 2025.

Consequently, Sarah’s disposal to Yellow Ltd will be caught by the anti-forestalling rules such that the higher rate of BADR will apply. Any amount of gain in excess of Sarah’s available lifetime limit will be charged at the main CGT rates applying in February 2025.

Claim to disapply the rule

Where a person believes that the gain arises from an excluded contract, and the disposal is subject to the lower BADR rates afforded pre-rate change day, they must make a claim to this effect their total gains on all excluded contracts is not more than £100,000. See CG10250 (https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg10250) for guidance on excluded contracts and how a claim should be made.

Example - Excluded contracts

Logan owns all the shares in Ace Ltd, along with a 2% shareholding in Beta Ltd. He enters two separate contracts on 6 December 2024; the first to dispose of his Ace Ltd shares, and the second to dispose of his Beta Ltd shares. Whilst the contract for the Beta Ltd shares completes on the same day, the Ace Ltd contract is delayed and ultimately completes on 4 May 2025. The Ace Ltd shares give rise to a gain of £55,000. The Beta Ltd shares give rise to a gain of £30,000.

Logan wishes to claim BADR on the gain arising from his Ace Ltd shares. As this disposal will be caught by the anti-forestalling rules, he would ordinarily need to make a claim to disapply the rules if he believes that no purpose of entering the contract was to obtain a tax advantage. However, as the cumulative total of both disposals is less than £100,000, and both disposals were affected by an ‘excluded contract’, no claim is necessary and the anti-forestalling rules will not apply.