With the Spring Budget approaching, Altius Group Director, Andrew Steen, explains the potential implications for business vendors:
For eligible business owners currently in the process of selling their business, or disposing of business assets, Business Asset Disposal Relief can be an important financial consideration. So, it’s vital to understand the impact of any potential changes in the upcoming budget.
What is Business Asset Disposal Relief (BADR)?
Previously known as Entrepreneurs’ Relief, BADR is a tax relief on Capital Gains Tax (CGT) when selling all or part of your business.
BADR reduces the amount of CGT on qualifying profits from 20% to 10%, up to a lifetime allowance of £1m, representing a potential tax saving of £100,000.
What are the changes you need to be aware of?
We don’t yet know what the Chancellor has planned for BADR – but what we do know of course, is that the government wants to bring down UK debt levels – and BADR would be a potentially ‘easy win’.
One possibility is that BADR is abolished. If this happens, it could result in a significant financial loss to a business vendor.
What can you do to mitigate any loss?
If you are a business owner currently in the process of selling your business – look at ways to expedite the process. Last time the Chancellor brought in changes to BADR, the lifetime limit was reduced from £10m to £1m – a considerable reduction. This amendment was swiftly made, giving those affected little time to react.
If at all possible, work with your purchaser and your professional advisers to get the deal over the line as quickly as possible and hopefully receive the full benefit of business asset disposal relief – regardless of what the Chancellor has planned this spring.
