Business Asset Disposal Relief claims under scrutiny

HMRC is currently looking at claims to Business Asset Disposal Relief (BADR) made in the 2024/25 Self Assessment tax return.

What is BADR?

BADR (formerly known as Entrepreneurs’ Relief) is an important Capital Gains Tax (CGT) relief. It can be available where someone disposes of qualifying business assets, such as shares in a company. In recent years, the value of the relief has been reduced, but where conditions are met, CGT on qualifying gains is charged at a reduced rate of:

• 10% for 2024/25

• 14% for 2025/26

• 18% from 2026/27

What is HMRC doing?

HMRC has been writing to taxpayers who claimed BADR in their 2024/25 Self Assessment tax return where its data suggests that they might have exceeded the £1 million BADR lifetime limit. This could happen if someone had exceeded the lifetime limit before the claim in the return, or because the claim in the return had taken them over the limit. It is, of course, possible that the claim for BADR is correct, and does not need amendment.

Receiving a letter

HMRC routinely uses letters like these to nudge taxpayers to check their tax position, and they do not necessarily mean there is a problem. It is important, though, that letters of this type are not ignored. They do need a response within the deadline given, whatever the circumstances. Failure to act can mean that HMRC will amend a return or open an enquiry. There is also the potential for interest and penalties.

Your agents, we should receive a copy of any such letter, and will deal with it on your behalf. Please bear in mind, however, that HMRC systems are not foolproof, so if you get a letter and have any concerns, do contact us.