The Entrepreneurs’ Relief has been renamed Business Asset Disposal Relief (BADR) since March 2020. It minimises the capital gains tax rate to 10 percent on shares. This makes the United Kingdom tax heaven for business persons.
So, if your looking for a significant source to know about BADR, you just have found the right source. We will let you know about:
- What is BADR, and who is eligible for it?
- What are the rules of BADR?
- How much and How to claim BADR?
So, let’s start!
Our tax professionals can assess your situation and let you know where you stand. We suggest improvements (if needed) that will get you closer to meeting the Business Assets Disposal Relief requirements. Contact us now!
What is Business Asset Disposal Relief (BADR)?
When the business owners dispose of relevant assets of their business, a BADR is a valuable CGT relief that is available to them.
It is an important area of tax planning, and it can minimise the tax rate on the first £1 million of eligible capital gains to 10 percent. Many business owners should confirm their eligibility for it as a part of their exit planning.
What are the BADR Rules?
The rules for business asset disposal relief are as follows:
- There should be some proof of working in the company (no minimum hours or salary requirements).
- Non-executive directors & secretaries of the company will be counted as officers.
- A document employment contract provides evidence of employment and will help you if HM Revenue & Customs challenges your claim.
Who is Eligible for Business Asset Disposal Relief?
It is usually available to:
- Company directors and employees at the time of disposal of shares in their personal trading enterprise.
- Trustees when making disposal of their company assets, in certain cases.
- Company employees and directors who sell qualified shareholdings that are earned under an EMI (enterprise management incentive) share option scheme.
- Sole traders or partners at the time of selling the entire or part of their trading enterprises.
How Much BADR Can you Claim?
Business Asset Disposal Relief is available for qualifying gains up to the lifetime threshold that is applied when making disposal.
For qualified disposals made on or after (March 11, 2020), the lifetime threshold was minimised to £1 million. If you surpass the lifetime limit, then excess gains will be taxed at the usual rate of capital gains tax (CGT).
How do you Claim BADR?
You must claim the BADR to HM Revenue & Customs for the year in which gain arises. It must be claimed by the first anniversary of (January 31) following the tax year of disposal. If you fail to do so, then you will not be eligible for business asset disposal relief.
For BADR, you can claim via a Self-Assessment tax return. You can also claim by making a standalone claim, and usually, most claims are made on personal tax returns.
We will conclude our blog by saying that a business asset disposal relief is not automatic; you have to claim it at the right time mentioned above. Otherwise, you will not qualify for this relief. Therefore, to be on the safe side, it is better to hire a professional for claiming BADR tax relief on your behalf.
Looking for a professional to claim BADR? Then, feel free to contact us! We are a team of professionals that will handle everything with HMRC on your behalf and help you claim what is rightfully yours! So, contact us right away!