If you own a property or other asset personally and your partnership or personal company uses it, the gain when you sell it can qualify for Business Asset Disposal Relief as an associated disposal under section 169K TCGA 1992. You must also make a qualifying disposal of at least a 5% interest in the partnership or the company, both disposals must be part of your withdrawal from the business, and relief is cut back where the business paid you rent.

What is an associated disposal?

Business assets are often held outside the business: the owner of a company keeps the freehold of its premises personally, or a partner owns the workshop the firm uses. Selling the shares or the partnership share does not sell those assets. Section 169K lets the separate sale of the personally owned asset share in the relief given on the main disposal, which the legislation calls the relevant material disposal (CG63995).

It applies only to assets used by a partnership in which you are a partner or by a company that is your personal company. A sole trader’s own assets are part of the business itself, so they are dealt with under the ordinary rules for selling a business or selling assets after it ceases (see Business Asset Disposal Relief).

What must the main disposal look like?

One of four conditions must be met (section 169K(1A) to (1D)):

  • A1: you dispose of at least a 5% interest in the partnership’s assets;
  • A1A: you dispose of your whole partnership interest, it is under 5%, and you held at least 5% for a continuous three years within the eight years ending with the disposal;
  • A2: you dispose of shares that make up at least 5% of the company’s ordinary share capital, in your personal company;
  • A3: you dispose of securities making up at least 5% of the value of the company’s securities.

The 5% is of the whole partnership or the whole share capital, not 5% of your own holding (CG63996). For disposals from 29 October 2018 the shares no longer have to carry votes. The main disposal must itself be a material disposal of business assets, but it does not need to produce a gain or a claim.

There must be no partnership purchase arrangements or share purchase arrangements at the date of the disposal: arrangements under which you, or a person connected with you, can acquire an interest in the partnership or shares in the company or its group. Arrangements made before both disposals and without regard to either are ignored (section 169K(6A)). See connected persons.

A deemed disposal under section 122 does not count as the main disposal, except a capital distribution in the course of winding up the company (section 169K(1C)). That allows premises to qualify alongside distributions in a members’ voluntary liquidation.

What does withdrawal from participation mean?

Condition B requires the asset sale to be made as part of your withdrawal from participation in the business (section 169K(3)). CG63998 says this is about reducing your interest in the partnership’s assets or your shareholding, not the amount of work you do. HMRC’s examples include a director who sells her shares and the factory unit in a takeover but stays on as managing director.

The legislation sets no time limit between the two disposals. CG63998 says HMRC may accept the link where the asset is sold:

  • within one year of the business ceasing;
  • within three years of the business ceasing, if the asset has not been leased or used for any other purpose since; or
  • where the business continues, within three years of the main disposal, if the asset has only been used for the business.

Outside those guidelines the facts are examined. If the asset is used for another purpose for a significant period after the main disposal, relief is unlikely.

How long must the asset have been used and owned?

Condition C: the asset must have been in use for the business throughout the two years ending with the earlier of the main disposal and the cessation of the business (section 169K(4)). Condition D: you must have owned it throughout the three years ending with its sale (section 169K(4A)). CG63996 says condition D applies to assets acquired on or after 13 June 2016. If a jointly held interest increased during the three years, only the proportion held throughout qualifies.

How does rent restrict the relief?

Section 169P requires the qualifying gain to be reduced to a just and reasonable amount where:

  • the asset was used in the business for only part of your ownership;
  • only part of the asset was used in the business;
  • you were involved in the business for only part of the time it used the asset; or
  • the business paid rent for its use for any period after 5 April 2008.

For rent, the reduction reflects the extent to which the rent paid was less than a market rent (section 169P(5)(d)). So a full market rent removes relief on the gain for the period it was paid, a nominal rent leaves almost all of it, and a partial rent gives a proportionate result. Rent includes any form of consideration for using the asset (CG64145). HMRC’s example works on time apportionment of the gain over the period of business use. HMRC does not seek an adjustment where the conditions are met only occasionally or trivially, or for seasonal gaps in use. Where any rent was charged, HMRC may ask for a computation and a view of market rent and can refer it to the Valuation Office.

Illustration only.

Sam owns 60% of a company and personally owns its warehouse, bought in 2014. The company used it rent free until 5 April 2021 and then paid a full market rent until Sam sold his shares and the warehouse together on 5 April 2027. The gain on the warehouse is £240,000 over 13 years of business use, of which 6 years were at market rent. A just and reasonable split might give relief on £240,000 multiplied by 7 divided by 13, about £129,000, at 18%. The remaining £111,000 is taxed at main rates. Had the rent been half a market rate, relief would extend to half of the £111,000 as well.

Does it share the £1 million lifetime limit?

Yes. A disposal associated with a relevant material disposal is a qualifying business disposal, and section 169N aggregates relevant gains and caps the BADR rate at £1 million of lifetime gains. In HMRC’s example at CG64145 the gain on the partnership share and the gain on the property are added together to find the gain attracting relief. For disposals from 6 April 2026 the BADR rate is 18% (CG63955). If the shares alone use up the limit, the premises get no benefit.

What mistakes come up?

  • Selling less than 5% of the total share capital, for example 5% of your own 40% holding, which is 2% of the company.
  • Charging the company full market rent for years to extract cash, then expecting full relief on the property.
  • Keeping the premises and letting them to a third party after selling the shares, then selling years later.
  • Selling shares to a buyer while you or a family member keep a right to buy back in.
  • Forgetting the three year ownership rule for property bought shortly before the sale.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.