Budget November 22nd 2023 – Is the clock ticking for Business Asset Disposal Relief?
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 scrapped.
The next budget is due on 22nd November 2023. 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, to find out what will happen to BADR this time. The current consensus is that it will not be scrapped, but that further reductions/restrictions could be applied. These might include one, some, or all of the following:
- A minimum shareholding of 25%
- A minimum length of share ownership of 10 years
- A minimum age – 55? – for the relief to apply
In addition, any tax savings under whatever amendments are made to BADR could be combined with a reduction in Capital Gains Tax (CGT), personal allowances and/or an increase in the rate of CGT to align with income tax. This latter move was proposed by the Office of Tax Simplification in 2021 but has yet to be implemented by the Chancellor.
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.
We can advise 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.
The initial consultation is FREE and without obligation. Contact us at any Bournemouth office on 01202 923009