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</li> <li class="govuk-breadcrumbs__list-item"> <a data-ga4-link='{"event_name":"navigation","type":"breadcrumb","index_link":"2","index_total":"3"}' class="govuk-breadcrumbs__link" href="/browse/tax">Money and tax</a> </li> <li class="govuk-breadcrumbs__list-item"> <a data-ga4-link='{"event_name":"navigation","type":"breadcrumb","index_link":"3","index_total":"3"}' class="govuk-breadcrumbs__link" href="/browse/tax/capital-gains">Capital Gains Tax</a> </li> </ol> </nav> </div> </div> <main role="main" id="content" class="answer govuk-main-wrapper" lang="en"> <span id="Top"></span> <div class="govuk-grid-row"> <div class="govuk-grid-column-two-thirds"> <div class="gem-c-heading govuk-!-margin-bottom-8"> <h1 class="gem-c-heading__text govuk-heading-xl"> Incorporation Relief </h1> </div> </div> </div> <div class="govuk-grid-row"> <div class="govuk-grid-column-two-thirds"> <div class="responsive-bottom-margin"> <div data-module="govspeak" class="gem-c-govspeak govuk-govspeak 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your business in return for shares worth £100,000. You make a profit of £60,000. You later sell the shares and need to work out the gain - their cost for your Capital Gains Tax calculations is £40,000 (£100,000 - £60,000).</p> </div> <h2 id="if-you-get-cash-as-well-as-shares">If you get cash as well as shares</h2> <p>You might receive cash and shares when you transfer your business.</p> <p>You only get Incorporation Relief on the proportion of the business you exchange for shares - you’ll have to pay Capital Gains Tax on the cash.</p> <div class="example"> <p>Example</p> <p>Your business is valued at £100,000 when you transfer it, and you receive 80% in shares (£80,000) and 20% in cash (£20,000). You made a gain of £50,000. You can postpone 80% of the gain (£40,000) until you sell the shares. You need to pay Capital Gains Tax on 20% of the gain (£10,000) in your next tax return. </p> </div> <h2 id="if-you-do-not-want-to-claim-incorporation-relief">If you do not want to claim Incorporation Relief</h2> <p>You can choose not to have Incorporation Relief. <a href="/government/organisations/hm-revenue-customs/contact/self-assessment">Contact HM Revenue and Customs</a> (<abbr title="HM Revenue and Customs">HMRC</abbr>) if you need advice, or <a href="/tax-help">get help</a> from an accountant or tax adviser.</p> </div> </div> </div> <div class="govuk-grid-column-one-third"> <div class="gem-c-contextual-sidebar govuk-!-display-none-print"> <div data-module="ga4-link-tracker" class="gem-c-related-navigation govuk-!-display-none-print"> <h2 id="related-nav-related_items-485c9f28" class="gem-c-related-navigation__main-heading"> Related content </h2> <nav class="gem-c-related-navigation__nav-section" aria-labelledby="related-nav-related_items-485c9f28" data-module="gem-toggle"> <ul 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"https://www.gov.uk/government/collections/capital-gains-tax-detailed-information" } ], "about": [ { "@context": "http://schema.org", "@type": "Thing", "sameAs": "https://www.gov.uk/money/personal-tax-capital-gains-tax-business" }, { "@context": "http://schema.org", "@type": "Thing", "sameAs": "https://www.gov.uk/money/capital-gains-tax" } ], "mainEntity": [ { "@type": "Question", "name": "Incorporation Relief", "url": "https://www.gov.uk/incorporation-relief", "acceptedAnswer": { "@type": "Answer", "url": "https://www.gov.uk/incorporation-relief", "text": "\u003cp\u003eYou may be able to delay paying \u003ca href=\"/capital-gains-tax\"\u003eCapital Gains Tax\u003c/a\u003e if you transfer your business to a company in return for shares.\u003c/p\u003e\n\n\u003cp\u003eIncorporation Relief means you will not pay any tax until you sell (or ‘\u003ca href=\"/capital-gains-tax/overview\"\u003edispose of\u003c/a\u003e’) the shares.\u003c/p\u003e\n\n" } }, { "@type": "Question", "name": "Eligibility", "url": "https://www.gov.uk/incorporation-relief#eligibility", "acceptedAnswer": { "@type": "Answer", "url": "https://www.gov.uk/incorporation-relief#eligibility", "text": "\n\n\u003cp\u003eTo qualify for Incorporation Relief, you must:\u003c/p\u003e\n\n\u003cul\u003e\n \u003cli\u003ebe a sole trader or in a business partnership\u003c/li\u003e\n \u003cli\u003etransfer the business and all its assets (except cash) in return for shares in the company\u003c/li\u003e\n\u003c/ul\u003e\n\n" } }, { "@type": "Question", "name": "How to claim", "url": "https://www.gov.uk/incorporation-relief#how-to-claim", "acceptedAnswer": { "@type": "Answer", "url": "https://www.gov.uk/incorporation-relief#how-to-claim", "text": "\n\n\u003cp\u003eYou do not have to claim Incorporation Relief - you’ll get it automatically if you’re eligible.\u003c/p\u003e\n\n\u003cp\u003eTo work out the amount you need to pay Capital Gains Tax on, deduct the gain you made when selling your business from the market value of the shares you received.\u003c/p\u003e\n\n\u003cdiv class=\"example\"\u003e\n \u003cp\u003eExample\u003c/p\u003e\n\n \u003cp\u003eYou transfer your business in return for shares worth £100,000. You make a profit of £60,000. You later sell the shares and need to work out the gain - their cost for your Capital Gains Tax calculations is £40,000 (£100,000 - £60,000).\u003c/p\u003e\n\u003c/div\u003e\n\n" } }, { "@type": "Question", "name": "If you get cash as well as shares", "url": "https://www.gov.uk/incorporation-relief#if-you-get-cash-as-well-as-shares", "acceptedAnswer": { "@type": "Answer", "url": "https://www.gov.uk/incorporation-relief#if-you-get-cash-as-well-as-shares", "text": "\n\n\u003cp\u003eYou might receive cash and shares when you transfer your business.\u003c/p\u003e\n\n\u003cp\u003eYou only get Incorporation Relief on the proportion of the business you exchange for shares - you’ll have to pay Capital Gains Tax on the cash.\u003c/p\u003e\n\n\u003cdiv class=\"example\"\u003e\n \u003cp\u003eExample\u003c/p\u003e\n\n \u003cp\u003eYour business is valued at £100,000 when you transfer it, and you receive 80% in shares (£80,000) and 20% in cash (£20,000). You made a gain of £50,000. You can postpone 80% of the gain (£40,000) until you sell the shares. You need to pay Capital Gains Tax on 20% of the gain (£10,000) in your next tax return. \u003c/p\u003e\n\u003c/div\u003e\n\n" } }, { "@type": "Question", "name": "If you do not want to claim Incorporation Relief", "url": "https://www.gov.uk/incorporation-relief#if-you-do-not-want-to-claim-incorporation-relief", "acceptedAnswer": { "@type": "Answer", "url": "https://www.gov.uk/incorporation-relief#if-you-do-not-want-to-claim-incorporation-relief", "text": "\n\n\u003cp\u003eYou can choose not to have Incorporation Relief. \u003ca href=\"/government/organisations/hm-revenue-customs/contact/self-assessment\"\u003eContact HM Revenue and Customs\u003c/a\u003e (\u003cabbr title=\"HM Revenue and Customs\"\u003eHMRC\u003c/abbr\u003e) if you need advice, or \u003ca href=\"/tax-help\"\u003eget help\u003c/a\u003e from an accountant or tax adviser.\u003c/p\u003e\n\n" } } ] } </script><script type="application/ld+json"> { "@context": "http://schema.org", "@type": "BreadcrumbList", "itemListElement": [ { "@type": "ListItem", "position": 1, "item": { "name": "Home", "@id": "https://www.gov.uk/" } }, { "@type": "ListItem", "position": 2, "item": { "name": "Money and tax", "@id": "https://www.gov.uk/browse/tax" } }, { "@type": "ListItem", "position": 3, "item": { "name": "Capital Gains Tax", "@id": "https://www.gov.uk/browse/tax/capital-gains" } } ] } </script> </body> </html>

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