There has been much speculation around the possibility of abolishing Entrepreneurs’ Relief. However, the Government has decided to retain the relief with the purpose of encouraging genuine entrepreneurial risk-taking. One change that the Government did make is that from 2020/2021, Entrepreneurs’ Relief has been renamed as Business Asset Disposal Relief.
Business Asset Disposal Relief (BADR) reduces the amount of capital gains tax payable on the disposal of a business asset. If an asset is a qualifying asset, the rate of Capital Gains Tax payable is 10%. Capital Gains Tax rates for non-qualifying business assets can range between 10% - 20% and 18% - 28% depending on the type of asset disposed of and the taxpayer’s level of income.
In order to qualify for BADR, certain conditions must be met throughout the ‘qualifying period’. After 6 April 2019, the qualifying period equates to two years, ending with the date that the disposal takes place, therefore, all the following criteria must be met for the duration of the two-year qualifying period:
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- You have been a sole trader, officer or employee of the company
- In this capacity, you have held 5% or more of the share capital of the company and 5% of voting share capital
- You haven’t exceeded your £1 million lifetime limit
Please note that qualifying furnished holiday lets will attract BADR on the eventual disposal.
Personal Tax Advice, Edinburgh
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