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HMRC internal manual

Capital Gains Manual

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Transfer of a business to a company: introduction and interaction with other reliefs

TCGA92/S162

Introduction
Partnerships
Companies
Interaction with other reliefs

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Introduction

TCGA92/S162 applies where a person other than a company transfers a business as a going concern with the whole of its assets (or the whole of its assets other than cash) to a company wholly or partly in exchange for shares. Provided that various conditions are satisfied, see CG65710, the charge to CGT on the whole or part of the gains will be postponed until such time as the person transferring the business disposes of the shares.

The way the relief works in practice is that all or part of the gains arising on the disposals of the assets are ‘rolled over’ against the cost of the shares.

Relief under TCGA92/S162 is sometimes referred to as ‘incorporation relief’.

A claim is not required because the relief is automatic. However, the person transferring the business can make an election under TCGA92/S162A to prevent relief under TCGA92/S162 from applying, see CG65730.

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Partnerships

Relief is available to individuals who are partners (even if one or more of the other partners is a company) where the whole of a partnership business is transferred to a company as a going concern.

The relief is computed separately for each partner.

Relief is not precluded where one or more of the other partners receive cash or a combination of shares and `other consideration’, see CG65720.

Relief is not available where a partnership or LLP incorporates into an existing corporate member.  This is because the corporate partner already owns a share of the business assets, so the whole assets of the business will not have been transferred. 

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Companies

Relief under TCGA92/S162 is not available to companies but TCGA92/S140 provides a similar relief for companies on the transfer of a trade carried on outside the United Kingdom to a non-resident company, see CG45660+.

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Interaction with other reliefs

The interaction of the various reliefs available on the disposal of business assets is explained at CG60210+.

CG66974+ explains the relationship between claims under TCGA92/S162 and claims under TCGA92/S165 (hold-over relief for gifts of business assets).