The claim for disincorporation relief has to be jointly claimed by the shareholders and company within two years of the date of transfer. It is best to use the services of a qualified firm of accountants to make your claim for disincorporation relief, as this is the best way to ensure eligibility and to ensure that all forms are correctly completed.
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This form of tax relief enables companies to transfer specific assets to shareholders without a corporation tax charge being levied on the assets’ disposal. Usually, a transfer of assets from a company to its shareholders is treated as occurring at market value for tax purposes. This means that the company may have to pay corporation tax even if its market value is below its original price. Claiming disincorporation relief enables qualifying assets to be transferred below their market value, ensuring no charge for corporation tax for the company.
Qualifying, Transfer and Eligibility
A qualifying transfer must meet the following conditions:
- The business is being transferred as a going concern
- It is being transferred together with its assets
- The qualifying assets’ total market value is not over £100,000
- The shareholders to whom the business is transferred are individuals.
- The shareholders have had shares in that company for 12 months before the transfer is carried out.
Companies and their shareholders can claim disincorporation relief if the company is transferring its business to all or some of the shareholders, and it is a qualifying transfer. However, shareholders may still need to pay capital gains tax or income tax on that transfer of assets, and capital gains tax may be payable if the assets are disposed of later.
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