2021 Autumn Budget – Business Asset Disposal Relief Predictions

Oct 21, 2021

On Wednesday 27 October the Chancellor, Rishi Sunak, will announce the 2021 Autumn Budget.

M&A activity has been thriving both globally and, in the UK, so it is not surprising that entrepreneurs and advisors are keen to see if any changes will be made to Business Asset Disposal Relief (BADR) (formerly named Entrepreneurs’ Relief).

Business Asset Disposal Relief was introduced to encourage and stimulate business investment by allowing business owners to benefit from a more advantageous rate of Capital Gains Tax (“CGT”) when disposing of any qualifying assets (which can often include the sale or disposal of all or part of their business). However, the 2020 Spring Budget saw the lifetime amount upon which BDAR can be used against, reduced from £10 million down to £1 million. During the Chancellor’s announcement of the 2020 Spring Budget, he labelled BADR as “expensive”, “ineffective”, “unfair” and therefore, it is possible further changes may be introduced.

Budget predictions

It is currently being speculated that the Chancellor will make one of the following announcements in relation to Business Asset Disposal Relief:

a) There will be no changes to Business Asset Disposal Relief: following the changes already made in the 2020 Spring Budget (which saw the reduction in the lifetime allowance from £10 million down to £1 million), the Chancellor may bear this in mind and decide not to make any further changes to BADR.

b) Business Asset Disposal Relief rates may be increased: BADR currently offers a reduced rate of CGT on qualifying assets at a rate of 10% as opposed to the standard 20%. However, some have theorized that this reduced rate could be increased. An increase in the BADR CGT rate will mean business owners will be liable for more tax when disposing of a qualifying asset.

c) Business Asset Disposal Relief may be abolished: BADR has been referred to by the Office of Tax Simplification (OTS) as “mistargeted” and has recommended BADR is replaced with a new relief applicable to retiring individuals. If the abolition of BADR is announced, individual business owners will be liable to pay CGT at the standard rate of 20% (provided CGT rates do not change) and therefore they may want to ensure any disposals are brought forward in order to benefit from BADR while they can.

For further information or to discuss the issues raised either prior to the budget or post the Autumn Budget, please contact our Corporate team on 01276 686222 or at yavan.brar@herrington-carmichael.com.

This reflects the law at the date of publication and is written as a general guide. It does not contain definitive legal advice, which should be sought as appropriate in relation to a particular matter.

Yavan Brar

Yavan Brar

Managing Partner, Head of Corporate and Commercial

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