What is Business Asset Disposal Relief in an MVL?

What is Business Asset Disposal Relief (or Entrepreneurs’ Relief) and do I qualify?

Business Asset Disposal Relief is a tax relief scheme which allows you to halve the effective rate of Capital Gains Tax (CGT) from 20% down to just 10% on the sale or disposal of qualifying assets. This can represent a huge tax saving for company directors who meet the qualifying conditions. Business Asset Disposal Relief was known as Entrepreneurs' Relief until 6 April 2020.

In order to benefit for Business Asset Disposal Relief as a company director or employee, you must have a minimum shareholding of 5% when the sale or disposal is made. There is no limit to the number of businesses you can sell and still qualify for this scheme, however, Business Asset Disposal Relief has a lifetime limit set at £1 million worth of qualifying capital gains.

How can you make a claim for Business Asset Disposal Relief?

When you dispose of a business, or part of a business, you may be eligible to claim Business Asset Disposal Relief (sometimes known as Entrepreneurs’ Tax Relief). Disposal can be facilitated through a sale or gifting of the business, or closing down the company through a solvent liquidation procedure known as Members’ Voluntary Liquidation (MVL).

By claiming Business Asset Disposal Relief you reduce the liability for Capital Gains Tax, but you must meet the qualifying conditions during the two years prior to the disposal or sale.

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The deadline for claiming is the 31 January of the year following the tax year in which the sale or disposal was made.

At Real Business Rescue, our licensed insolvency practitioners and experienced business advisers are well placed to support you through your business exit strategy and provide industry-leading advice on Business Asset Disposal Relief/ Entrepreneurs’ Relief. We provide a free initial consultation at your convenience and assist directors, shareholders, and stakeholders across the UK through an extensive network of 100+ offices.