What is Business Asset Disposable Relief (BADR)?
Business Asset Disposable Relief (BADR), formerly known as entrepreneurs’ relief before 2020 is a tax on the gains you make when you sell or dispose of an asset, such as shares, land, jewellery, and property. It is important to note that BADR does not exempt individuals from Capital Gains Tax (CGT), but it does provide relief from the amount due in certain circumstances. As it is vital to familiarise yourself with CGT, we have prepared a separate article that you can reach out to here.
How do you Qualify for Business Asset Disposable Relief (BADR)?
In order to qualify for BADR, you must meet certain criteria this includes having sold or disposed of a business asset in the last two years and meeting any or all of the following requirements:
- You have owned and disposed of the asset for at least two years
- You are an individual (not a company)
- You are resident in the UK for tax purposes
- You have disposed of a "business asset" (e.g. shares, land, and property)
- Your BADR entitlement is £1 million or less
If you meet all of these requirements, then BADR can be claimed to reduce your CGT liability on the disposal of a business asset.
When can I claim Business Asset Disposable Relief (BADR)?
BADR can be claimed at any time and there is no deadline for claiming BADR. As long as you meet the criteria outlined above, you are entitled to BADR relief.
It is important to note that BADR does not exempt individuals from CGT and it must be paid for all disposals of assets. However, BADR reduces the amount which is due in certain circumstances.
What is considered a Disposed of Assets?
Disposed assets are any asset that has been sold or exchanged for money, goods, or services. This includes shares, land and property, jewellery, and other items of value. In general sold or scrapped assets like machinery, equipment, furniture, and vehicles are not eligible for BADR unless it was used in the business. If you are a co
How do I claim BADR Self Assessment?
If you are eligible for BADR, you can claim it through the self-assessment process, get in touch with our accountant to have a detailed discussion, or by filling up the HS275 form. This requires completing a BADR section in your tax return and providing evidence of ownership to HMRC.
You must provide evidence that shows you have owned the asset for at least two years before disposing of it, such as bank statements or other financial records.
For more like this, take a look at common claims that you forget on your self-assessment tax returns here.
How do you Calculate Business Asset Disposable Relief (BADR)?
BADR is calculated based on the amount you have made in gains on a disposed asset. This includes any capital gains tax due before BADR relief can be claimed.
By adding up your capital gains and deducting the losses, if there are any, you end up with "total taxable gain". Take off your tax-free capital gains and 10% of what`s left is your business asset disposable relief.
Once BADR has been applied, the remaining amount is then subject to CGT and this should be included in your self-assessment form.
For more calculators, please take a look at our tax and relief calculators here.
Conclusion
Business Asset Disposable Relief (BADR) is a tax relief which can help reduce your CGT liability on the disposal of business assets. To be eligible for BADR, you must meet certain criteria and provide evidence of ownership to HMRC in order to claim BADR relief. BADR should be calculated based on the amount you have made in gains on a disposed asset and BADR should then be applied to reduce your CGT liability.
