HM Revenue and Customs (HMRC) are writing to taxpayers they suspect may have overclaimed Business Asset Disposal Relief (BADR).
BADR, which was formerly known as Entrepreneurs’ Relief, allows business owners to sell or dispose of their business assets or shares in their personal company by paying a reduced rate of capital gains tax (CGT).
There is a lifetime limit of £1 million of capital gains that can qualify for BADR. HMRC reduced the lifetime limit from £10 million on or after 11 March 2020. If you have unintentionally overclaimed this relief you may receive a letter from HMRC regarding a claim on your 2022/23 Tax Return.
If you receive a letter, check all claims you have made for ER/BADR are valid as soon as you can. It is important you contact HMRC within 30 days of the date on the letter. Failure to respond is likely to result in HMRC amending your Tax Return, discounting the BADR claim, or opening an enquiry into your Tax Return. If HMRC find any additional tax is due during the course of the enquiry, penalties will be charged.
If you are unsure about what to do, please feel free to contact one of our private client tax advisers on 01223 810100 and we will be happy to help you.