Disincorporation Relief to End in March 2018

Tax Comments Off on Disincorporation Relief to End in March 2018

Disincorporation relief will not be extended beyond its 31 March 2018 expiry date.

The relief was introduced in April 2013 in a bid to remove the tax burdens when small business owners want to change from a limited company to a sole trader or partnership.

It allows companies to transfer certain assets, such as land, building and goodwill, to shareholders without incurring a corporation tax charge.

However, the relief has not been widely used in the three years after its launch.

Until March 2016, fewer than 50 businesses made claims for disincorporation relief – despite around 610,000 firms being eligible to access the relief.

The Chartered Institute of Taxation (CIOT) attributes the lack of uptake in part to the relief’s £100,000 limit.

John Cullinane, tax policy director at the CIOT, said:

“The government should have searched for a solution that addresses the differences between the taxation of different types of income, and between incorporated and unincorporated businesses.

“A broader relief with some anti-avoidance provisions might play a sensible part in a more rational overall system which tries to reverse the current tax incentive for businesses to incorporate.”

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