Rush to finalise deals amid BADR fears

As the Autumn Budget 2024 approaches, Clarke Willmott LLP, a leading law firm, reports a significant increase in urgency among business owners looking to finalize sales. The acceleration is driven by concerns over the potential abolition of Business Asset Disposal Relief (BADR), a key tax relief mechanism that allows business sellers to pay a reduced Capital Gains Tax (CGT) rate of 10% on qualifying disposals.

Kim Klahn, a partner in Clarke Willmott’s corporate team, highlighted the anxiety surrounding possible changes to BADR as part of broader tax reforms. “With the chancellor warning of ‘difficult decisions’ ahead, there is growing speculation that BADR could be reduced or abolished, leading to higher tax liabilities for those selling their businesses,” Klahn explained.

This speculation has prompted a rush to complete deals before the Budget announcement on October 30, 2024. The uncertainty surrounding the potential changes has spurred business owners to expedite their transactions, fearing that any government decision could take immediate effect or be implemented from the start of the next tax year, significantly impacting their financial outcomes.

BADR, formerly known as Entrepreneurs' Relief, plays a crucial role in retirement planning and reinvestment strategies for business owners, particularly those of privately-owned small and medium-sized enterprises (SMEs). If BADR were to be reduced or abolished, it could have profound implications for these business owners, potentially altering their long-term financial strategies.

Klahn, who regularly advises on mergers and acquisitions, noted that the government's decision on CGT will be closely watched, as it could have wide-reaching consequences for taxpayers and the broader economy. The potential abolition of BADR would impact various types of business disposals, including assets of sole traders, interests in partnerships, trust assets, and shares in private trading companies.

As the Budget date looms, the business community remains on edge, preparing for possible changes that could redefine the landscape of business sales and taxation in the UK.