Your answer should take into consideration any incorporation and business asset disposal (entrepreneur’s) relief which are available to Mr Smith. Business Asset Disposal Relief reduces the amount of Capital Gains Tax (CGT) on a disposal of qualifying business assets on or after 6 April 2008, as long as you have met the qualifying conditions throughout a 2 year qualifying period either up to the date of disposal or the date the business ceased. Qualifying capital gains for each individual are subject to a lifetime limit as follows, for disposals on or after:

6 April 2008 to 5 April 2010,

£1 million 6 April 2010 to 22 June 2010,

£2 million 23 June 2010 to 5 April 2011,

£5 million 6 April 2011 to 10 March 2020,

£10 million 11 March 2020, £1 million.