What is the rate of CGT on an incorporation

What is the rate of CGT on an incorporation

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Following the changes announced in December 2014 that incorporating an existing business and selling the goodwill to a related company will no longer qualify for ER, what is the position whereby a partnership incorporates and transfers the business premises valued at say £5m (3m gain) and the goodwill say valued at £5m (£5m gain) to a company in return for shares and £1m cash (loan account)?  A tax charge will arise on the £1m cash consideration if we claim incorporation relief but at what rate? CG65720 states that it is not possible to attribute the cash consideration to a particular asset.  Previously, this would not have been a problem as ER would have been in point meaning that the gains on both the property and the goodwill would have been chargeable to tax at the same rate i.e.10%.  Now we have a situation whereby one gain qualifies for the 10% rate but the other does not.  What is the tax charge on the £1m?  

I also appreciate that I can structure the transaction differently and use Section 165 but I was just wondering whether this problem has been considered by the contributors to this site.

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By Montrose
25th Feb 2015 12:48

ER and partnerships

There is no problem here, as TCGA s59(1)(b) makes clear that, for CGT, partnership transactions are to be treated as transactions by the individual partners.

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By Portia Nina Levin
25th Apr 2015 17:30

(No subject)

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