Business Owners Looking For An Exit: The Ticking Business Asset Disposal Relief Clock 

Tick tock tick tock … business asset disposal relief knock knock …

The Business Asset Disposal Relief clock is ticking as we approach the end of 2024 with Christmas Day just around the corner.

And if you spot the hot tax topic coming around that corner …

… What do you do? What do you do? 

Speed is of the essence.

Business Asset Disposal Relief Deadline

Two clocks are ticking terrifically as we are about to tuck into turkey in a couple of days:

• Self Assessment Personal Tax Returns.
• Business Asset Disposal Relief Restrictions. 

For business owners looking for an exit after years of slaving away building their businesses, they have limited time available to plan how they might wish to address the effects of the Treasury’s capital gains tax BADR Budget news coming in April 2025.

In the budget on 30 October 2024, the Chancellor announced a business asset disposal relief restriction coming into force from April 2025. The rate of capital gains tax applicable for transactions to which Business Asset Disposal Relief relief applies rises from 10% to 14%.

At the same time, capital gains tax (other than for residential property) will rise from 10% to 18% and from 20% to 24%.

Planning An Exit Strategy For Business Owners By Members Voluntary Liquidation

One commonly deployed routine for business owners looking for an exit after selling their business trading assets is to place the relevant company into Members Voluntary Liquidation.

A distribution by a liquidator is typically treated as a capital distribution for the shareholders concerned hence the potential attraction of claiming Business Asset Disposal Relief.

However, in view of the April 2025 deadline for the increase in these key capital gains tax provisions a business owner seeking to take advantage may perhaps want to consider a New Year’s Resolution to move on their tax planning with adequate alacrity.

Whilst a Members Voluntary Liquidation can be effected speedily it is not a process that automatically can be done without preparation and following due process. 

HMRC tax clearance has ceased. It is no longer afforded to offer comfort and it is the liquidator who needs to review the tax affairs of the company and satisfy himself or herself that everything is in order. This may take a bit of time depending upon a given company’s records and organisation.

In order to take advantage of the Business Asset Disposal Relief rate of 10% the liquidator will need to have made the relevant distribution(s) before 6 April 2025.

Happy New Tax Year!

So once you have recovered from any New Year’s Eve excesses and your business exit sprouts in the mind to offer sobering tax thoughts you might wish to remember the BADR News on the way and see how you might still make 2025 a very Happy New Tax Year!

Wishing you all a very Happy Christmas.