HMRC is currently looking at claims to Business Asset Disposal Relief made in the 2024/25 Self Assessment tax return.
What is BADR and what is HMRC doing?
Business Asset Disposal Relief, formerly known as Entrepreneurs’ Relief, is an important Capital Gains Tax relief available when someone disposes of qualifying business assets. Where conditions are met, capital gains tax on qualifying gains is charged at reduced rates of 10% for 2024/25, 14% for 2025/26, and 18% from 2026/27.
HMRC has been writing to taxpayers who claimed BADR where data suggests they might have exceeded the 1 million pound BADR lifetime limit. This can happen if the limit was exceeded previously or if the current claim pushed the total over the threshold. However, it is entirely possible that the claim is correct and requires no amendment.
Responding to HMRC letters
HMRC routinely uses these letters to nudge taxpayers to check their tax position. While they do not necessarily indicate a problem, they must not be ignored and require a response within the given deadline. Failure to act can result in amended returns, formal enquiries, interest, and penalties.
As your agents, we should receive a copy of any such letter and will deal with it on your behalf. If you receive a letter and have any concerns, please don’t hesitate to get in touch.
