Looking to close your Solvent Company? Act now and talk to us about Business Asset Disposal Relief (“BADR”) and how it can save you money
The Chancellor did not scrap Business Asset Disposal Relief (BADR) in the Spring Budget on 23rd March 2022. We are pleased to report it is still available for Members’ Voluntary Liquidations
We wrote this article before the Spring Budget of 23rd March 2022, advising those business owners who were considering closing their solvent companies via a Members Voluntary Liquidation to act quickly, as there was a chance that the Chancellor would reduce the benefit to be had from the Relief, or perhaps scrap it completely. In the event, no changes were made.
It still remains possible that BADR will be in the firing line with future Budgets, as the Chancellor will be looking at ways of funding the cost of the Covid-19 economic support packages for years to come. If it is scrapped, or the benefit is reduced, then directors looking to close their solvent companies using a Members Voluntary Liquidation would not benefit from the current reduced rate of Capital Gains Tax, which has saved many £000s for them. So now is still a good time to close down a company using a solvent liquidation.
Talk to us now about BADR and Members Voluntary Liquidations
There are many reasons why directors close down a solvent company. Sometimes a company has just come to the end of its useful life; on other occasions it is because the directors/owners are retiring and there is no-one to take over the running of the company. In recent months, we have seen an increase in MVLs as a continued response to the difficulties caused by the Covid-19 pandemic and its aftermath. In these cases, directors who have worked hard to keep their companies solvent have decided that they would prefer to liquidate, get their money out and move on to something new.
It is, of course, a big decision to take, and we are here to help in that decision making process. So, talk to us now to get things underway.
Business Asset Disposal Relief might be available if you close your solvent company using a Members Voluntary Liquidation.
When business owners decide to sell or wind-up their solvent company using a Members Voluntary Liquidation (MVL), they might be eligible for Business Asset Disposal Relief (formerly known as Entrepreneurs’ Relief). This has been an attractive and popular method of reducing the amount of Capital Gains Tax that must be paid on the sale of a company and/or its assets, from the standard rate to a 10% rate, subject to the existing statutory limits. We can advise whether your business qualifies for such relief and what these limits are. It can save business owners many £000s.
Udobi Nzelu explains things in this video:
Looking to close your Solvent Company?
Save Tax and take advantage of Business Asset Disposal Relief via a Members Voluntary Liquidation
In recent budgets there has usually been speculation that BADR will be scrapped – the March 2020 budget saw the relief capped at a lifetime limit of £1 million, for example. Against the background of the huge amount of money the Government has borrowed to fund the costs of Covid-19, come the inevitable concerns of tax rises and cost cuts to pay for it. Once again it is believed that Business Asset Disposal Relief might well be up for abolition. It is suggested that such a move could save the Treasury c.£2.5billion per annum.
Will BADR be scrapped in the future?
We will not know for sure until the next Budget, of course. The consensus is that it will not be, but that further reductions/restrictions could be applied. These might include one, some, or all of the following:
- A minimum shareholding of 25%
- A minimum length of share ownership of 10 years
- A minimum age – 55? – for the relief to apply
In addition, any tax savings under whatever amendments are made to BADR could be combined with a reduction in Capital Gains Tax (CGT) personal allowances and/or an increase in the rate of CGT to align with income tax. This latter move was proposed by the Office of Tax Simplification last year but has yet to be implemented by the Chancellor.
So, if you are a company owner/director and you are considering selling or winding-up your solvent company, consider whether using a Members Voluntary Liquidation would work for you. Now is the time to talk to us. Even if future budgets do not scrap BADR, further restrictions/reductions . There is unlikely to be a better time than now.
Who qualifies for Business Asset Disposal Relief?
There are many reasons why owners/directors decide to sell/wind-up their solvent companies, including:
- The company was set up for a specific purpose or contract, now completed.
- The business has become outdated and is now past its useful life.
- The directors/owners wish to retire and there is no succession plan in place.
To qualify for BADR:
- The Relief allowance is generally only available via a Members Voluntary Liquidation process
- You must be a director, partner or employee with more than a 5% shareholding in the company.
- The business must have been a trading company for the last 24 months.
- Speak to your accountant for specialist tax advice as they will know your personal financial circumstances.
Only a Licensed Insolvency Practitioner can be appointed as Liquidator for an MVL.
Only a licensed insolvency practitioner, such as the licence holders at Antony Batty & Company, can be appointed as a liquidator for an MVL. In general terms, the starting point for proceedings with an MVL is that the company must:
- have completed its business and ceased to trade.
- anticipate having surplus funds left once all creditors have been paid.
- have deregistered or be in the process of deregistering for VAT, PAYE/NIC and Corporation Tax
- have filed or be in the process of completing and filing accounts and returns up to the date the business ceased trading.
- be able to pay any unpaid creditors within 12 months of the start of the MVL.
Talk to us about a Members Voluntary Liquidation and Business Asset Disposal Relief
Here at Antony Batty & Company, we have successfully completed hundreds of MVLs since we opened for business in 1997. Click here to see some of our testimonials.
If you are thinking about closing down or winding-up your solvent company and want to avoid any further reductions and restrictions on BADR that future budgets might impose, then the sooner you talk to us the better.
The initial consultation is FREE and without obligation. Contact us at any of our offices: