Disposing of a business through a sale or merger can be both an exciting process and a logistical nightmare.
Dealing with the practicalities can be demanding enough without having to think about the financial side.
However, there are tax reliefs in place to help you when disposing of business assets which you own that help to reduce the amount of tax that you are liable for.
What is Business Asset Disposal Relief?
Business Asset Disposal Relief (BADR) – previously known as Entrepreneurs’ Relief – is a tax relief meaning you may be able to reduce how much Capitals Gains Tax (CGT) you owe upon disposing of a business asset.
Instead of paying the higher CGT rate of 20 per cent, if eligible, you will pay the BADR rate of only 10 per cent.
Am I eligible for BADR?
Eligibility for BADR varies depending on if you are selling part all or part of your business, if you are selling shares or securities from the business, or if you are selling assets which you have lent to the business.
Selling all or part of the business:
If you are selling all or part of your business, you can qualify by having both points below:
If you are closing your business altogether, then these points also still apply. However, you must also dispose of your business assets within three years so that you are still eligible for BADR.
Selling shares or securities:
In order for you to be entitled to BADR when selling shares or securities, the following must both be true for at least two years before you sell any shares:
However, it should be noted that there are different rules in place which you will need to check if the business is part of an Enterprise Management Incentive (EMI).
Selling assets you lent to the business:
Here, to qualify for BADR when selling assets which you have lent to the business, you must:
If you would like to talk to us about business disposals or have any queries regarding BADR, please do not hesitate to contact us.
