BADR questions

3Dwarves
3Dwarves Posts: 23
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Hello,

Turning to forumites for some guidance on a bit of a tricky tax return this year.

There is something I don't understand about how BADR (Business Asset Disposal Relief) and self assessment work together.

When I file the self assessment (deadline by end of January 2024) and I declare proceeds from sale of company which happened that tax year, do I pay CGT on them at 20% by January 31, 2024?

Then, I claim BADR separately, for which the deadline is end of January 2025, one year later, and then I get 10% refunded on what I already paid?

Can I file tax return with the capitals gains by the end of January 2024, but pay no tax on them this year, because the deadline is effectively 2025 to claim the BADR? Can I for example not declare the proceeds of this sale this year and instead declare them by end of January 2025 together with the Business Asset Disposal Relief?

Finally, is it possible to file the tax return and claim BADR by end of January 2024 and pay only 10% tax on the proceeds? 

Also, who should I contact for more help, please?

Thank you!

Comments

  • [Deleted User]
    [Deleted User] Posts: 0
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    edited 17 January at 3:55PM
    The capital gain, and any reliefs available, must be declared on the return pertaining to the tax year when the disposal took place. 

    You state that it happened ‘that tax year’. What tax year? When was the actual date of sale?

    https://www.gov.uk/business-asset-disposal-relief/how-to-claim
  • 3Dwarves said:
    Hello,

    Turning to forumites for some guidance on a bit of a tricky tax return this year.

    There is something I don't understand about how BADR (Business Asset Disposal Relief) and self assessment work together.

    When I file the self assessment (deadline by end of January 2024) and I declare proceeds from sale of company which happened that tax year, do I pay CGT on them at 20% by January 31, 2024? Yes, unless you make a claim for BADR.  This is because BADR is not automatic.  You can choose to claim it or not.  

    Then, I claim BADR separately, for which the deadline is end of January 2025, one year later, and then I get 10% refunded on what I already paid?  Yes, you can do that if you want to.  If you make that claim by 31 January 2025 then you will get a refund of the tax that you overpaid in January 2024. 

    Can I file tax return with the capitals gains by the end of January 2024, but pay no tax on them this year, because the deadline is effectively 2025 to claim the BADR? Can I for example not declare the proceeds of this sale this year and instead declare them by end of January 2025 together with the Business Asset Disposal Relief?  No. If the gains is in 2022/23 then it must be included on the 2022/23 tax return. You then have to pay the tax on that by 31 January 2024, you can't delay paying tax (without the normal consequences for paying tax late).

    Finally, is it possible to file the tax return and claim BADR by end of January 2024 and pay only 10% tax on the proceeds? Yes.  Just claim BADR on your 2022/23 tax return.  Most people will claim BADR on the tax return for the year the gain is made.  The extra year is to give you a bit of hindsight to see if it is worth making the claim.  For most people it will be worthwhile but not necessarily so (e.g. if you expect future BADR gains and have capital losses.

    Also, who should I contact for more help, please? A professional tax adviser.

    Thank you!
    See my comments in bold.
  • More_complicated_than_that
    More_complicated_than_that Posts: 171
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    edited 22 January at 2:51PM
    ... and any reliefs available, must be declared on the return pertaining to the tax year when the disposal took place. 
    That's not quite right with BADR - see s169M (and s169Q in appropriate cases)
  • 3Dwarves
    3Dwarves Posts: 23
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    Thank you, all, that was very helpful. 
  • 3Dwarves
    3Dwarves Posts: 23
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    edited 22 January at 1:45PM
    One last question please about BADR lifetime allowance, that is confusing me. 
    In the relevant section in the tax return, the box to be filled in, asks:

    Lifetime allowance of Business Asset Disposal Relief and Enterpreneur's Relief *claimed* to date

    and in the help section under it, it says:

    If a claim is being made for this year, then the amount to include in this box is the total claimed for gains in this and in any previous year. The amount entered in this box must not exceed £1 million.

    What confuses me is this. When they say the total claimed - do they mean the total gains and not the 10% BADR that is claimed for the corresponding claims?

    Basically, I have the total gains, and in this specific box, which asks for Lifetime allowance of Business Asset Disposal Relief and Enterpreneur's Relief *claimed* to date, do I include all the gains on which I have claimed BADR, or do I include the 10% of the total gains, because that is my BADR *claim*, as I understand it?

    Because the amount *must not exceed £1 million*, I am thinking they want me to include the gains on which I am claiming BADR.

    It's very confusing to even explain it. 


  • 3Dwarves said:
    One last question please about BADR lifetime allowance, that is confusing me. 
    In the relevant section in the tax return, the box to be filled in, asks:

    Lifetime allowance of Business Asset Disposal Relief and Enterpreneur's Relief *claimed* to date

    and in the help section under it, it says:

    If a claim is being made for this year, then the amount to include in this box is the total claimed for gains in this and in any previous year. The amount entered in this box must not exceed £1 million.

    What confuses me is this. When they say the total claimed - do they mean the total gains and not the 10% BADR that is claimed for the corresponding claims?

    Basically, I have the total gains, and in this specific box, which asks for Lifetime allowance of Business Asset Disposal Relief and Enterpreneur's Relief *claimed* to date, do I include all the gains on which I have claimed BADR, or do I include the 10% of the total gains, because that is my BADR *claim*, as I understand it?

    Because the amount *must not exceed £1 million*, I am thinking they want me to include the gains on which I am claiming BADR.

    It's very confusing to even explain it. 
    The BADR is based on aggregate gains (rather than tax paid).  So if you have previously claimed ER on £100,000 and BADR on £50,000, you now have a limit of £850,000.  If you have a £30,000 BADR gain this year then you are limited to £820,000 of BADR gains in future years.

    Another way of saying that is when thinking about BADR is, ignore the tax and just think of the gain.
  • 3Dwarves
    3Dwarves Posts: 23
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    I am confused because they say input *total claimed* and I understand that *claimed* stands for the relief claimed, which stands at 10% of the gains. 
    But because they say the amount can't be more than £1 million, I am inclined to think that they intended to say the total amount of gains on which BARD has been claimed, effectively asking me to add from this and previous years the amount of gains. 
    Alternatively I imagine they want me to include there the relief I have claimed via BADR, but this sounds wrong. 
  • 3Dwarves said:
    I am confused because they say input *total claimed* and I understand that *claimed* stands for the relief claimed, which stands at 10% of the gains. 
    But because they say the amount can't be more than £1 million, I am inclined to think that they intended to say the total amount of gains on which BARD has been claimed, effectively asking me to add from this and previous years the amount of gains. 
    Alternatively I imagine they want me to include there the relief I have claimed via BADR, but this sounds wrong. 
    You claim relief for the gain.  The relief you get is to use the 10% tax rate and not the normal 20% one for higher rate taxpayers. 

    The most BADR you can claim is (nowadays) £1m and so the most tax saving you can get is £100,000 (being £1m x [20% - 10%]). 
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