Incorporation relief – how does this tax work?

When an unincorporated business is transferred to a limited company, the disposal takes place at market value. This creates a large CGT liability for the sole trader. To avoid this, HMRC have introduced s162 TCGA 1992 incorporation relief. This allows the sole trader’s gain to be postponed until the shares in the company are sold in the future.

Now, this topic regularly appears in tax exams, and our expert Neil Da Costa explains how incorporation relief works in the January edition of PQ magazine.

Check it out his latest article in the ‘keep in simple’ at: