The disincorporation relief was introduced in April 2013 in a bid to remove the tax burdens small business owners face when changing over from a limited company to a sole trader or partnership.
The scheme was designed to allow companies to transfer certain assets such as land, building and goodwill to shareholders without incurring a corporation tax charge. Shareholders would then be able to continue to operate the business in an unincorporated form and use the reduced transfer value of any assets when calculating future capital gains.
Despite the fact that more than 600,000 companies in the UK were eligible for the relief, up until March 2016, less than 60 businesses made a claim. If you have made a claim for disincorporation relief and are worried about how this might affect you, please contact us about our business development and consultancy services and we will be able to assist.
When questioned about the lack of interest in the scheme, The Chartered Institute of Taxation (CIOT) attributed the lack of uptake in part to the relief’s £100,000 limit.
John Cullinane, tax policy director at the CIOT, commented:
“The government should have searched for a solution that addresses the differences between the taxation of different types of income and between incorporated and unincorporated businesses.”
“A broader relief with some anti-avoidance provisions might play a sensible part in a more rational overall system which tries to reverse the current tax incentive for businesses to incorporate.”
If you’re thinking about changing the structure of your company and would like help or information about this, please contact PKB about our business development and consultancy services and we will be more than happy to help.