Although reliefs are available to a business that chooses to incorporate, historically there have been no corresponding reliefs for companies that wish to discorporate. Tax charges can arise where a company wishes to transfer business assets to shareholders who want to carry on the business in an unincorporated form.
To remove barriers to disincorporation, disincorporation relief is available for five years from 1 April 2013. The relief enables certain assets to be transferred at a reduced value for corporation tax purposes. It is only available to businesses whose qualifying assets do not have a market value in excess of £100,000.
The relief must be claimed jointly by the company and the shareholders who wish to carry on the business in an unincorporated form.
A word of caution – the relief does not cover tax charges that may arise on shareholders where assets are distributed below market value in the course of a disincorporation.
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