How can I claim relief on the transfer of assets when my company changes from a private limited company to a sole trader or partnership owned business?
Disincorporation Relief allows a company to transfer certain types of assets to its shareholders (who continue to operate the business in an unincorporated form) without the company incurring a Corporation Tax charge on the disposal of the assets.
The business transfer by the company will be a ‘qualifying transfer’ for the purposes of Disincorporation Relief if it meets all of the following conditions:
- the business must be transferred as a going concern
- the business must be transferred together with all the assets of the business or together with all the assets of the business apart from cash
- the total market value of the qualifying assets at the time of the transfer must not be more than £100,000
- the shareholders that the business is transferred to must be individuals
- those shareholders must have held shares in the company throughout the 12 months before the transfer
Qualifying assets are interest in land (other than land held as trading stock) and goodwill (ie the reputation of the business).
This relief is only available for disincorporations that take place from 1 April 2013 to 31 March 2018 and it was not extended in the recent budget.
HMRC’s website, goes into more detail at www.gov.uk/guidance/corporation-tax-disincorporation-relief.