Overview of Business Asset Disposal Relief

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BADR or Business Asset Disposal Relief is a tax relief offered to eligible people who dispose of qualifying company assets.

It was earlier called Entrepreneurs’ Relief and was introduced by the UK government to encourage entrepreneurship and support the growth of small businesses.

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The relief applies to the disposal of business assets such as shares, land, buildings, and other assets used in a business, including intellectual property rights.

When an eligible individual disposes of a qualifying business asset, they may be entitled to a lower rate of CGT or Capital Gains Tax on the profits they make from the disposal.

Eligibility for business asset disposal relief

The relief provides a lower rate of 10% capital gains tax on the qualifying gains of up to £1 million, a lifetime limit.

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To be eligible for BADR, the following conditions must be met:

  1. The individual must have owned the business or asset for at least two years before the date of disposal.
  2. The business or asset must be disposed of as part of the material disposal of the individual’s business.
  3. This includes the sale of the whole or part of the business, the disposal of shares or securities in a trading company or the holding company of a trading group, or the disposal of assets used in the business when the business is being discontinued.
  4. The individual must have been a sole trader or business partner, an officer or employee of the company, or a shareholder who holds at least 5% of the ordinary share capital and voting rights of the company for at least two years before the disposal.
  5. The company must be a trading company or the holding company of a trading group throughout the two-year period before the disposal.
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It’s important to note that the rules around Business Asset Disposal Relief can be complex, and eligibility may depend on the specific circumstances of each case.

It’s always a good idea to seek professional advice for entrepreneur relief with Insolvency Online before making any decisions related to business disposals.

The current rate of BADR is 10%, which means that eligible individuals will only pay CGT at this reduced rate on the profit they make from the disposal of qualifying business assets, up to £1 million.

It’s important to note that BADR is subject to change, so it’s always a good idea to check the latest guidance from HM Revenue and Customs (HMRC) before making any decisions regarding asset disposal.

Why claim for business asset disposal relief?

If you’re eligible for the relief, you’ll pay a reduced rate of CGT of 10% on the qualifying gain.

Claiming Business Asset Disposal Relief can be beneficial for business owners who are looking to sell or dispose of their business assets, as it can significantly reduce the amount of tax they’ll have to pay.

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However, it’s important to note that not all business assets qualify for relief, and there are certain eligibility criteria that must be met in order to claim it.

It’s always recommended to seek the advice of a professional tax advisor to determine your eligibility for Business Asset Disposal Relief and to ensure that you’re following the correct procedures when making a claim.

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