November 10, 2025
Article
Business Asset Disposal Relief (BADR)
BADR, formally Entrepreneurs’ Relief, allows individuals to pay a reduced rate of Capital Gains Tax (CGT), on a material disposal of trading business assets, up to a £1million lifetime limit.
It is a relief that can support retiring or exiting business owners.
Broadly a material disposal is the disposal of the whole or part of a business that had been owned for 2 years before the date of disposal.
The reduced rate of CGT for BADR is currently 14% and set to increase to 18% from 6 April 2026. This remains favourable compared to CGT of 24% for individuals who already use their basic rate band with their general income.
A recent case, Moffat, is a reminder that BADR depends not only on a material disposal of business assets but also on the balance of trading vs non-trading activity. For rural businesses, where property and trading services often mix, that balance can be critical.
Moffat & Anor v HMRC - the background
Andrew and Charlotte Moffat sold shares in a holding company whose subsidiary managed moorings on the Thames. Alongside the moorings, the company offered repairs and maintenance. They claimed BADR on disposal.
HMRC disagreed, arguing the group was mainly exploiting rights over land. The Tribunal agreed, finding that the non-trading activity was “substantial”, so BADR could not apply.
The First Tier Tribunal looked hard at the accounts and the figures showed:
- About 68% of turnover came from mooring and licence fees – property income
- Around 80% of assets were tied to the moorings themselves – property income
- The trading element, the services, many of which were recharged at cost and not run as profit-making.
The tribunal called the non-trading side “substantial”, which is the key test. If non-trading activities are more than just incidental, the company will not qualify as a trading company for BADR. On that basis, the relief was denied.
What “substantial” means
There is no fixed threshold for “substantial”. HMRC suggest that if non-trading is below about 20% (measured across turnover, profits, capital value of assets and staff time), it is unlikely to be “substantial”.
Note that the term “substantial” is being used here in the context of CGT which is different to the “mainly” trading context in assessing Business Property Relief (BPR) for inheritance tax purposes.
Many rural businesses have diversified. These may fall into the non-trading territory. If services are provided alongside property rental at cost or only because the licence terms demand it, those services may be very unlikely to strengthen the trading argument based upon the Moffats case.
For example:
- Campsites and caravan parks, where pitch fees dominate.
- Glamping pods or shepherd’s huts, where the main charge is for space.
- Storage barns or units, often let out with minimal services.
- Festival or event parking, where the income is mostly for land use.
What to consider:
- Review how turnover, assets and staff time divide between property-based income and active services.
- Price services commercially, not just for recovery.
- Consider ring-fencing property-heavy activities in a separate entity or structure.
The key is to plan ahead; if you are looking to dispose of your business interest and BADR is to be utilised, reviewing how your business is operated or structured to utilise such reliefs ahead of this, may be beneficial.