An individual who transfers his business to a company avoids an immediate capital gains tax charge on chargeable assets that are transferred to the company, provided that the whole of the business or the whole of business excluding cash, is transferred to the company in exchange for the issue of shares.
Whilst this relief is available on the incorporation of a trade, but not of an investment, what has been less clear is whether the relief is available on transferring a property letting business to a company. In a recent case held before the first tier tribunal, the judge held that the activity of the individual in respect of the property outweighed “what might normally be expected to be carried on by a mere passive investor”. In this case therefore the activities were sufficient in their nature and extent to amount to a business for the purpose of incorporation relief. This does not mean that incorporation relief will be available every time a property letting business is incorporated, but it does mean that, incorporation relief may be possible, depending on the level and extent of the activities carried on by the individual.