Glossary · UK
What is Disincorporation Relief?
A former relief allowing a company to transfer business assets to shareholders at no immediate tax cost when reverting to sole trader status.
Full Definition
Disincorporation Relief was a temporary UK tax relief that allowed a company to transfer qualifying assets (goodwill and interests in land) to its shareholders at no immediate chargeable gain when the business was transferred from a limited company to a sole trader or partnership. The relief was introduced from 1 April 2013 and was available for a limited five-year window, ending on 31 March 2018. No new claims can be made after that date. The relief was designed to help small owner-managed companies that had incorporated but then found that remaining as a company was no longer beneficial -- for example, following changes to corporation tax rates, entrepreneurs relief, or the treatment of goodwill on incorporation. Where the relief applied, the company was treated as disposing of qualifying assets for a consideration equal to their tax written-down value (for plant and machinery) or cost (for land), avoiding any corporation tax charge on the disposal. The shareholders took the assets at those same values. Disincorporation Relief was little used in practice due to the narrow window and the limited circumstances where it was advantageous. It should not be confused with the ongoing relief for incorporation under s162 TCGA 1992.