Here's a story we see play out more often than you'd think. A few years ago an owner splits the company's shares into classes, A shares, B shares, maybe C shares, usually so they can pay different dividends to a spouse, a key employee or a business partner. It works nicely. Everyone gets paid flexibly, the accountant signs it off, and nobody thinks about it again.
Then a buyer comes along. The deal is agreed, solicitors get involved, and the tax adviser runs the numbers, only to find that one of the shareholders no longer qualifies for the reduced rate of Capital Gains Tax on their slice of the sale. The structure that gave them income flexibility quietly disqualified them from Business Asset Disposal Relief (BADR). By the time it surfaces, it's usually far too late to fix.
This is the trap. Alphabet shares are a perfectly good tool for income planning, we cover the upside in detail in our guide to alphabet shares, but the way you design those classes can make or break a shareholder's BADR claim at exit. Below is what actually matters, in plain English.
Business Asset Disposal Relief (the relief formerly known as Entrepreneurs' Relief) gives a reduced rate of Capital Gains Tax on qualifying business disposals, up to a £1 million lifetime limit per individual. It's one of the few genuinely valuable reliefs left for owner-managers selling up, so qualifying for it is worth real money.