Disincorporation relief

Business: Business Tax

    Your company may be eligible for a Corporation Tax relief on assets transferred to shareholders if it ‘disincorporates’ (ie converts to another business structure, such as a partnership).

    The relief applies to the company’s:

    • land (apart from land held as trading stock)
    • goodwill (ie the reputation of the business)

    Read the detailed guidance on goodwill if your company has goodwill relating to a business that started on or after 1 April 2002, or you acquired goodwill from an unrelated party on or after 1 April 2002.

    How it works

    When assets are transferred to shareholders their market value is normally used to help calculate how much tax is paid on them.

    Disincorporation relief allows assets to be transferred at a rate below market value – meaning there is no Corporation Tax charge. This lower value is then used to calculate the tax shareholders must pay when they ‘dispose of’ (eg sell or give away) these assets.

    Read further guidance and examples of how the relief works.

    Eligibility

    Your company will be eligible for disincorporation relief if the:

    • assets are transferred to some or all individual shareholders who continue the business in an unincorporated form
    • shareholders that the business is transferred to have held shares in the company for the 12 months before the transfer
    • transfer happens between 1 April 2013 and 31 March 2018
    • business is transferred as a going concern with all its assets, or with all of its assets apart from cash
    • total market value of qualifying assets at the time of transfer is £100,000 or less

    How to claim

    Disincorporation relief must be claimed jointly by the company and all shareholders receiving assets.

    You can claim through the Company Tax Return – attach a PDF file detailing the claim to the return.

    You can also write to your company’s Corporation Tax Office with the details of the claim.

    You must include:

    • the name, address, Unique Taxpayer Reference (UTR) and company registration number of the company
    • the name, address, UTR (if available) and National Insurance number of each shareholder receiving assets
    • the value of each qualifying asset when they’re transferred
    • the date of the transfer
    • a declaration that the business has been transferred with all its assets, or with all of its assets apart from cash

    Claims must be made within 2 years of the transfer date but can’’t be made if the company has already closed down.

    Your company may be eligible for a Corporation Tax relief on transferred assets if it ‘disincorporates’ (ie convert the company into another business structure like a partnership