Solvent Liquidations & Upcoming Changes to Business Asset Disposal Relief
Business Asset Disposal Relief
One of the perhaps lesser mentioned items from the Autumn Budget 2024 was the upcoming changes to Business Asset Disposal Relief (“BADR”). BADR effectively provides shareholders of a business with tax relief if selling all or part of their business, assuming certain criteria can be met. Until 2020, BADR was known as Entrepreneur’s Relief and this is perhaps a name more familiar to those in business.
Upcoming Changes
The Autumn Budget 2024 introduced incremental increases to the rate of Capital Gains Tax paid when availing of BADR. The key points are as follows:
BADR will remain unchanged at 10% for the remainder of the 2024/25 tax year (i.e. until 5 April 2025).
BADR will increase from 10% to 14% from 6 April 2025.
BADR will increase again from 14% to 18% from 6 April 2026.
Whilst the Chancellor has staggered the increases purposely to provide time for businesses to adjust to the measures, it is important for any business owner / group of shareholders to think ahead.
Members’ Voluntary Liquidation
A Members’ Voluntary Liquidation (“MVL”) is a process which enables the closing down of a solvent business that has reached its natural end, allowing the shareholders to extract the value they have created in a tax efficient manner. As part of an MVL, independent tax advice will be required in respect of whether the shareholders can qualify for BADR. It is worth noting that, even if BADR criteria is not met, an MVL process enables capital treatment of any distributions, meaning more favourable Capital Gains Tax rates are applied as opposed to Income Tax rates.
NI SMEs
The changes to BADR will impact all business owners seeking to wind down a solvent business and extract value. Inherently, the larger the cash distributions are, the more material impact the hikes to BADR will have.
At Keenan CF, we are team of licensed insolvency practitioners who have an abundance of MVL experience. Get in touch for an introductory discussion.
Chris McNeill
Licensed Insolvency Practitioner
11 February 2025