Business Asset Disposal Relief (BADR) is still available for Members’ Voluntary Liquidations. Take advantage of the 10% tax rate.
When business owners decide to sell or wind-up their solvent company using a Members Voluntary Liquidation (MVL), they might be eligible for Business Asset Disposal Relief (formerly known as Entrepreneurs’ Relief). This has been an attractive and popular method of reducing the amount of Capital Gains Tax that must be paid on the sale of a company and/or its assets, from the standard rate to a 10% rate, subject to the existing statutory limits.
In recent budgets there has usually been speculation that BADR will either be scrapped or reduced. The March 2020 budget, saw the relief capped at a lifetime limit of £1 million, which at the 10% tax rate means that the maximum saving per person is £100,000. Since then, BADR has remained untouched.
However, against the background of rising Government debt and the need to reduce expenditure, each new budget produces speculation that BADR might be further cut or even scrapped. There is also speculation that with a general election due no later than 28th January 2025, and with opinion polls predicting a change in government, there may be further implications for BADR.
The next budget is due on 6th March 2024. Will BADR be affected?
Government figures show that for 2021/22, the cost of BADR to the Treasury was £900 million and that the number of claimants was c.46,000. We will not know for sure until the budget announcement is made, of course, what will happen to BADR this time. The current consensus is that it will not be scrapped, but that further reductions/restrictions might be applied. Some possible new restrictions could include:
- Introducing an increased minimum shareholding and voting rights percentage (currently it is 5% if the shares are non-Enterprise Management Incentive -EMI – eligible)
- Raising the minimum length of share ownership from the current 2 years.
- Introducing a minimum age for eligibility. As of now there isn’t one.
Currently, the main eligibility criteria to qualify for BADR if all or part of a business is being sold, are that the following must apply for at least 2 years up to the date of the sale of the business:
- The individual is a sole trader or business partner.
- The individual has owned the business for at least 2 years.
The same conditions apply if a solvent business is being closed and additionally that the business’s assets must also be disposed of within 3 years to qualify for the relief.
Talk to us about a Members Voluntary Liquidation and Business Asset Disposal Relief
So, if you are a company owner/director and you are considering winding-up your solvent company – especially if the current economic and financial pressures point to that being the best decision – consider whether using a Members Voluntary Liquidation would work for you. Now is the time to talk to us.
If BADR is scrapped, directors could end up paying up to £100,000 more in tax. Even if future budgets do not scrap BADR, further restrictions/reductions could apply. There is unlikely to be a better, more tax efficient time to close your solvent company than now.
Your accountant/tax advisor can advise you on whether your business qualifies for BADR. It can save business owners UP TO £100,000.
Here at Antony Batty & Company, we have successfully completed hundreds of MVLs since we opened for business in 1997. Click here to see some of our testimonials.
Our appointment taking Licensed Insolvency Practitioners are Antony Batty, Hugh Jesseman, Claire Howell, Matt Waghorn and Lawrence King.
The initial consultation is FREE and without obligation. Contact us at any of our offices:
Or talk to any of our Antony Batty & Company Thames Valley sister company, located at:
