Change to Entrepreneurs’ Relief – things just got BADR

With the country’s attention focused on COVID-19, the change to Entrepreneurs’ Relief (ER) announced in the budget on 11 March has gone largely unnoticed.

ER provided a reduced rate of Capital Gains Tax (CGT) on the sale of a business or interest in a business, with the normal rate of CGT being reduced from 20% to 10%, with a lifetime limit of £10m of gains per individual.

From 11 March 2020, the lifetime limit has been reduced to just £1m and the relief will now be known as Business Asset Disposal Relief (BADR).

ER was typically used by agricultural clients on retiral, and with the previous limit of £10m most were able to sell their farm and pay just 10% tax on the resultant capital gains.

The recent change will now result in all but the smallest farms being subject to 20% CGT on a proportion of the sales proceeds. On a 500 acre arable farm the extra tax could easily amount to £300k assuming a total capital gain of £4m.

The change of legislation highlights the importance of making full use of generous tax reliefs while they are available.

Those who are contemplating selling a farm soon would be advised to review their tax position to establish if any action can be taken to mitigate against this recent change in legislation.

If you have any queries regarding selling your farming business, or any other matter, please contact a member of our EQ Agriculture team via agriculture@eqaccountants.co.uk or call 01307 474274 / 01334 654044.

Alternatively, if you would like to discuss your tax planning options, please contact the Private Client Taxperts.