Simple Liquidation blog

What was formerly known as Entrepreneurs Relief is now known as Business Asset Disposal Relief (BADR). It is a tax relief benefit that can reduce the Capital Gains Tax (CGT) that is paid on the sale of the assets of a solvent company that is either being liquidated or sold. When a solvent company is liquidated, it is through a Member’s Voluntary Liquidation process in accordance with the laws dictated by the Insolvency Act 1986. When the assets of the solvent liquidated company are sold, CGT is applied but directors of the company that qualifies for BADR are able to pay half the amount of tax on the capital gains rather than the standard amount. So, how does Business Asset Disposal Relief work ?

Business Asset Disposal Relief reduces the amount of Capital Gains Tax ( CGT ) on a disposal of qualifying business assets on or after 6 April 2008, as long as you have met the qualifying conditions throughout a 2 year qualifying period either up to the date of disposal or the date the business ceased. Business Asset Disposal Relief was known as Entrepreneurs’ Relief before 6 April 2020. In order to take advantage of this tax relief, the company needs to go into a solvent liquidation process [Members’ Voluntary Liquidation-MVL] and the Liquidator will make capital distributions to shareholders, thereby enabling them to make the Business Asset Disposal Relief claim in their own Tax Returns. Who can claim relief Business Asset Disposal Relief is available to individuals and some trustees of settlements, but it’s not available to companies or in relation to a trust where the entire trust is a discretionary settlement. Personal Representatives of deceased persons can only claim if t...