Business Asset Disposal Relief (BADR), formerly known as Entrepreneurs’ Relief, allows qualifying shareholders to pay a reduced Capital Gains Tax rate of 10% on gains from the disposal of certain business assets, including shares. When a company buys back its own shares, shareholders may be eligible for BADR if specific conditions are met:
1. Qualifying Shareholding:
• Personal Company: The company must be your ‘personal company’ for at least two years up to the date of the share disposal. This means:
• You hold at least 5% of the company’s ordinary share capital.
• Your shareholding grants you at least 5% of the voting rights.
• You are entitled to at least 5% of the company’s distributable profits and 5% of its assets available for distribution on winding up, or at least 5% of the proceeds if the entire share capital were sold. 
2. Role in the Company:
• You must be an employee or office holder (such as a director) of the company, or of another company within the same group, for at least two years up to the date of disposal. 
3. Trading Status:
• The company must be a trading company or the holding company of a trading group for at least two years up to the date of disposal. A trading company is one whose main activities do not include non-trading activities like investment. 
4. Share Buyback Specifics:
• Capital Treatment: For the proceeds from a company share buyback to be treated as capital (and thus potentially qualify for BADR), certain conditions must be met, including:
• The buyback is for the benefit of the company’s trade.
• The shareholder’s interest in the company is substantially reduced after the buyback.
• The shareholder must have held the shares for at least five years prior to the buyback (this period is reduced to three years for shares inherited from a deceased spouse or civil partner).
• The shareholder is UK resident in the tax year of the buyback.
• The buyback does not form part of a scheme or arrangement to enable tax avoidance.If these conditions are satisfied, the payment received by the shareholder can be treated as a capital distribution, making it eligible for BADR. If not, the payment may be treated as an income distribution, subject to Income Tax rather than Capital Gains Tax.
It’s important to note that tax laws can change, and individual circumstances can affect eligibility. Therefore, it’s advisable to consult with a tax professional or refer to the latest guidance from HM Revenue & Customs (HMRC) to ensure compliance and to understand the implications of a company share buyback.