Understanding Business Asset Disposal Relief (BADR) in a solvent liquidation (MVL)
Business Asset Disposal Relief, formerly known as Entrepreneurs’ Relief, is a tax relief scheme designed to reduce the Capital Gains Tax rate payable upon the sale or liquidation of a solvent company. Through this relief, Capital Gains Tax can be decreased to 10% for eligible gains, subject to a lifetime limit of £1 million.
What is Business Asset Disposal Relief, also known as Entrepreneurs’ Relief, in a solvent liquidation, and am I eligible?
Business Asset Disposal Relief is a tax relief scheme that enables you to reduce the effective rate of Capital Gains Tax (CGT) from a maximum of 20% to just 10% on the sale or disposal of qualifying assets. This can result in substantial tax savings for company directors who meet the eligibility criteria. Formerly known as Entrepreneurs’ Relief until April 6, 2020.
To qualify as a company director or employee, you must hold a minimum shareholding of 5% at the time of sale or disposal. There is no restriction on the number of businesses you can sell and still be eligible for this scheme; however, Business Asset Disposal Relief is subject to a lifetime limit of £1 million for capital gains.
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How do you go about claiming Business Asset Disposal Relief?
If you dispose of a business or a portion thereof, you could qualify for Business Asset Disposal Relief (also referred to as Entrepreneurs’ Tax Relief). Disposal can occur through a business sale, transfer, or closure via a solvent liquidation process called Members’ Voluntary Liquidation (MVL).
By utilising Business Asset Disposal Relief, you mitigate your Capital Gains Tax (CGT) liability, provided you satisfy the qualifying criteria within the two years preceding the disposal or sale.
The deadline for claiming is January 31 of the subsequent year following the tax year in which the sale or disposal occurred.
At Vanguard Insolvency, our licensed insolvency practitioners and seasoned business advisors are adept at guiding you through your business exit strategy and offering top-notch advice on Business Asset Disposal Relief, formerly known as Entrepreneurs’ Relief. We offer a complimentary initial consultation at a time that suits you and support directors, shareholders, and stakeholders nationwide through our extensive network of over 100 offices.
I am an insolvency professional with a distinguished career specialising in commercial insolvency, adeptly navigating Creditors Voluntary Liquidation, Company Voluntary Arrangements, and Company Administrations. With a comprehensive understanding of insolvency laws and an unwavering commitment to ethical practices.