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Disincorporation relief for small companies  

What's new?

Disincorporation relief ended on 31 March 2018. No corresponding new relief has been proposed meaning that there are currently no specific reliefs in respect of disincorporating a limited company. 

At a glance

Disincorporation relief was introduced by the 2013 Finance Act.

The measure applies to disincorporations undertaken between 1 April 2013 and 31 March 2018.

If a company's shareholders want to transfer its business into sole tradership or a partnership business there will normally be a capital disposal of the company's assets of land and goodwill. This new relief is designed to remove that tax charge.

Conditions for a qualifying transfer

Transfer value

The disposal value of the relevant assets depends on the type of asset, when created and its tax treatment in the company accounts.

Land and property

The deemed disposal or transfer value is the lower of cost and market value.

Goodwill

The deemed disposal value is the lower of:

Explaining the above in more detail, the disposal value is set by a new s849A added to CTA 2009. The transfer is treated differently depending on whether sections 735, 736 or 738 of CTA 2009 would apply to the disposal of the asset, were it not for Disincorporation relief.

Other assets transferred

Any other assets, such as plant, stock or debtors are not qualifying business assets for the purposes of this relief and so the value of these can be agreed on disposal by the company.

Disincorporation relief: tax Masterclass

For detailed guidance see Disincorporation Masterclass this explains everything you need to know about the rules in "At a glance" and detailed form, including the interaction of the different deemed transfer values and corporate intangibles regime. It provides worked examples. The Masterclass is only available to our subscribers.


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