Reshma Johar considers what options a sole trader or partner of a partnership have when their unincorporated business is transferred into a company.
On incorporation, a taxpayer will have a choice between the use of either gift relief (TCGA 1992, s 165), incorporation relief (TCGA 1992, s 162), or simply paying the capital gains tax (CGT) at the time of disposal.
Given that the taxpayer has a choice of potentially the two reliefs, it will be a matter of understanding the current and future intentions of the taxpayer to determine which relief is best.
More about the reliefs
Incorporation relief will be available broadly where the following conditions are met:
- the business is transferred as a going concern;
- all assets of the trade (except cash) is