If you transfer your business to a company in return for shares, You may be able to delay paying Capital Gains Tax. Incorporation Relief means you will not pay any tax until the shares a sold or disposed of.
To qualify for Incorporation Relief, you must:
- be a sole trader or in a business partnership
- transfer the business and all its assets (except cash) in return for shares in the company
You’ll get Incorporation Relief automatically if you’re eligible, so you don’t need to do anything to claim.
To work out the amount you need to pay Capital Gains Tax on, deduct the gain you made when selling your business from the market value of the shares you received.
Example
You transfer your business in return for shares worth £100,000. You make a profit of £60,000. You later sell the shares and need to work out the gain – their cost for your Capital Gains Tax calculations is £40,000 (£100,000 – £60,000).
If you do not want to claim Incorporation Relief, you can choose not to claim it. Contact us to see how we can help.
For more information go to gov.uk/incorporation-relief.
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Nigel Holland