HMRC are sending nudge letters to Business Asset Disposal Relief (BADR) claimants, who have made a claim within their 2021-22 Tax Returns. HMRC believe these claimants may have exceeded their lifetime allowance.

Previously known as Entrepreneur’s Relief, BADR is an extremely valuable relief which can see the Capital Gains Tax (CGT) rate reduced to 10% where individuals are disposing of their business. A drastic change was seen in March 2020 where the BADR lifetime allowance was reduced from £10 million to £1 million. This change meant that gains arising after 10th March 2020 could only benefit from the reduced 10% tax rate if the individual’s historic claims were less than £1 million.

HMRC believe that this reduction in the lifetime allowance, may have led to errors in reporting, where individuals have not kept accurate records of their previous disposals which benefited from BADR. As such, HMRC intend to pursue these individuals with the hope of gaining an additional 10% CGT, along with late payment charges and interest.

Those who receive a letter from HMRC will need to review their historic BADR claims and make contact with HMRC within 30 days, to either confirm or amend their tax return. Failure to do so can result in HMRC opening an enquiry into your personal tax affairs.

If you are a recipient of this letter and wish to have any tax advice please reach out to our Tax Department here at Lambert Chapman LLP.

Illustration of a tiny man ticking boxes on a board

Posted by Adil Jamil

The views expressed in this article are the personal views of the Author and other professionals may express different views. They may not be the views of Lambert Chapman LLP. The material in the article cannot and should not be considered as exhaustive. Professional advice should be sought in connection with any of the issues contained in the article and the implementation of any actions.

Lambert Chapman Chartered Accountants

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