Incorporation relief

In this lesson

1. 0:00 Incorporation relief explained
2. 2:01 Capital gains on business assets
3. 3:57 Conditions for automatic relief
4. 5:23 Deferring gains with shares consideration
5. 6:20 Partial deferral with mixed consideration

About this lesson

You'll discover the conditions that must be met for relief to apply automatically, how to calculate the deferred gain, and why the proportion of shares in the consideration matters—because if you receive cash alongside shares, only part of the gain can be deferred. This is essential knowledge for the Taxation paper, where incorporation scenarios commonly appear in both objective tests and case studies. The lesson covers the key mechanics step by step. When you transfer business assets like land, buildings, and goodwill to a company, each asset is deemed disposed of at market value, triggering capital gains on chargeable assets. Rather than paying tax immediately, incorporation relief lets you reduce the base cost of the shares you receive by the amount of the deferred gain—effectively pushing the tax liability forward to when you eventually sell those shares. You'll also learn why chattels and plant and machinery follow different rules, and when it might be advantageous to elect out of incorporation relief if a different tax treatment would be more beneficial.

Duration: 7m