HMRC have issued the latest round of one-to-many letters, this time focusing on individuals exceeding the lifetime limit for Business Asset Disposal Relief (BADR). 

Gains qualifying for Business Asset Disposal Relief (BADR) are taxed at a 10% rate of Capital Gains Tax (CGT) up to a lifetime limit of £1 million. 

HMRC's latest nudge letter addresses individuals who have made a claim for BADR in 2022-23, where HMRC believes the individual has:

  • Already exceeded the £1 million lifetime limit.
  • Exceeded the lifetime limit due to their 2022-23 claim taking them over £1 million.

Affected taxpayers should check their tax return and amend it within 30 days of HMRC's letter if they identify an error. If individuals conclude an amendment is not required, HMRC requests to be informed within the same timeframe. 

If taxpayers in receipt of HMRC's letter take no action, HMRC warns that they may amend the submitted return, or open an enquiry. In such circumstances, Penalties and/or interest may be charged. 

Useful guides on this topic

Business Asset Disposal Relief (Entrepreneurs' Relief): Disposal of a business
Entrepreneurs' Relief (ER) was renamed Business Asset Disposal Relief (BADR) by Finance Act 2020. When does BADR apply? What is the rate of BADR? How do you claim BADR? What BADR case law is there?

Business Asset Disposal Relief (Entrepreneurs' Relief): Disposal of a joint venture interest
When does Business Asset Disposal Relief (BADR) (Entrepreneurs' relief) apply to the disposal of a joint venture interest? How do you claim BADR?

Business Asset Disposal Relief (Entrepreneurs' Relief): Disposal of shares or securities in a company
When can you claim Business Asset Disposal Relief (BADR) on a share sale? What is the rate of Business Asset Disposal Relief (Entrepreneurs' Relief)? How do you claim BADR? What case law is there on BADR?

Business Asset Disposal Relief (Entrepreneurs' Relief): Disposal of trust business assets
When can trustees claim Business Asset Disposal Relief (BADR)? Which types of trust is BADR available to? Who can claim BADR for a trust disposal of business assets?

CGT: How to calculate a capital gain or loss
How do you calculate a capital gain or loss? What costs are deductible? Can you set losses against capital gains?

Penalties: Errors in Returns and Documents (subscriber version)
What penalties apply if you make an error or mistake? Is there a penalty if you fail to tell HMRC about an under-assessment? How are penalties calculated? How do you check penalties? What can you do if you receive a penalty?

External links

CIOT: One to Many letters concerning the BADR lifetime limit