What is the Business Asset Disposal Relief (Entrepreneur’s Relief)?

What is it?

There are many reasons why an Entrepreneur may wish to sell or give away their business, and when this happens, the entrepreneur may be able to gain a benefit of a reduced tax rate, this benefit in particular is called The Business Asset Disposal Relief (previously known as the Entrepreneur’s Relief before April 2020).

The Business Asset Disposal Relief (BADR) is a tax relief scheme, which helps you maximise your financial gains if you are eligible to claim this when you are selling all or a part of your business.

The financial gain comes from the 10 % reduction of Capital Gains Tax that is paid on the profits you make when you sell any eligible assets (where usually you would be required to pay the standard 20% rate).

Are you eligible?

Unlike many Government schemes, the BADR is only available to individuals – not companies. These individuals include sole traders, company Directors and Partners, however there is a criteria you must meet in order to be eligible for the tax relief.

This scheme can only be applied if the company (or part of it) is being sold or if the company enters a formal liquidation process. The BADR scheme cannot be claimed if the company has been dissolved or struck off using a DS01 form.

To begin, you need to meet the criteria below during the ‘qualifying period’, this period is 24 months leading up to the disposal – the company also must have been trading during this time;

  • You haven’t exceeded your £1m lifetime limit
  • You have been a sole trader, officer or employee of the business
  • You have held 5% or more of the share capital of the business and also 5% of voting share capital.

All of this criteria must be met for the duration of this 2 year qualification period.

However, whilst the above is the general criteria, there are some differences that should be noted.

Selling the business – If the business is being sold as a whole or in parts, you must be the exclusive business owner or a business partner during the 2 year qualifying period, as well as also having owned the business for a minimum of two years.

Selling shares – If business shares are being sold, you needn’t be the business owner or business partner, however you must have been an employee or officer within the business during the 2 year qualifying period. You also must have held the share capital stated above. As well as this, to be able to claim the BADR on the disposal of shares, the company must be a trading company or a holding company of a trading group.

How to calculate BADR

Follow these steps to calculate the Business Asset Disposal Relief;

  1. Work out your total taxable gain by adding together all of your capital gains, less any losses.
  2. Take away your tax-free Capital Gains Allowance (£12,000)
  3. You will now only have to pay 10% on the final figure, the rest goes in your pocket.

How to claim

The BADR claim must be made to HMRC. This is usually submitted as a claim on your annual Self-Assessment tax return.

To avoid making any errors or to check if you qualify, get in touch with one our experts at hello@bkplus.co.uk.

Statutory Demands & Winding Up Petitions

In March 2020 one of the measures introduced in the Corporate Insolvency and Governance Act was the restriction of statutory demands and winding up petitions.

These restrictions were put in place to protect businesses from aggressive creditor enforcement, in an attempt to assist businesses concentrate their efforts on recovery.

Whilst they were due to expire on 30 June 2021, regulations are now set to be laid, that will mean the restrictions will remain for a further three months, until September 2021.

Currently a business that served a statutory demand between 1 March 2020 and 30 June 2021 cannot proceed with a winding up petition. A business can only present a petition for the winding up of a company, if it has a reasonable belief that the business has not been adversely affected by COVID-19 or that it would not have been able to meet the demand, regardless of the effects of the pandemic.

The Government’s full announcement can be found here.

Should you find yourself on either side of the fence, then now is the time to seek advice.

Please do not hesitate to contact Kim Richards at kim.richards@bkplus.co.uk or on 01922 922 943, should you need any further information.

 

Kim Richards Joins BK Plus

One of the regions newest and fastest growing accountancy firms has announced a new service offering, which will support businesses with their banking, financing and restructuring needs.

David Baldwin and Shaun Knight launched BK Plus Limited only 4 months ago.  The team is already 45 strong and it continues to grow.  Announcing their first acquisition after only 3 months, they are now adding to the services that they can offer their growing client base and other businesses.

BK Plus has appointed Kim Richards, a licenced insolvency practitioner with nearly 20 years’ experience in the sector, to build and develop a banking and restructuring team.

Kim said “It is great to be back working with David and Shaun, they have an amazing team around them and I’m looking forward to meeting up with existing contacts and making new ones too.

“As financial support in response to COVID is slowly withdrawn, we want to give guidance and support to businesses and owner managers to help them proactively navigate the road to recovery”.

“The earlier a business seeks professional advice in relation to its financial circumstances from a qualified, experienced person, the more options there are likely to be available to overcome any problems”.

Shaun Knight, co-founder of BK Plus, said the appointment will allow the firm to support new and existing clients, and, the wider business community.

He said: “Kim is very well known and respected in the business and legal community across the region and has vast experience in her field.  We are delighted to welcome her to the firm”.

“As well as restructuring advice, Kim understands the difficulties and financial strain that business owners can face and the impact that this can have on a company.  Kim brings an informed perspective to these challenges looking at viable solutions for recovery.”

“This is another exciting development for BK Plus, coming on the back of a very successful first few months and we expect to see this service line expand in the near future.”

The appointment comes after BK Plus acquired Chapman Nash accountancy in Barford, Warwick, as it expands its services north and south of Birmingham.

BK Plus, which is headquartered at Walsall Business Park, was launched to support SMEs, owner-managed businesses, and larger corporates.

It already provides a wide range of business advisory services such as accounts, audit, taxation, bookkeeping and payroll, through to corporate finance and other specialist advice.