Taxation of Chargeable Gains Act 1992 section 162

Roll-over relief on transfer of business

Section 162 provides automatic roll-over relief (sometimes called "incorporation relief") when an individual or partnership transfers a business as a going concern to a company, wholly or partly in exchange for shares, allowing the capital gains tax charge to be deferred until the shares are eventually sold.

• The relief applies when a person (not a company) transfers a business as a going concern, together with all its assets (or all assets other than cash), to a company wholly or partly in exchange for shares issued by that company.
• The relief is automatic (no claim is needed), but the transferor can elect under section 162A to disapply it; the net chargeable gains on the old business assets are rolled over by reducing the base cost of the new shares by the proportion of gains attributable to the share consideration.
• The rolled-over amount is calculated as A/B multiplied by the net gains on the old assets (where A is the cost of the new shares and B is the total consideration received), but cannot exceed the cost of the new shares — so where liabilities are close to or exceed asset values, relief may be restricted or unavailable.
• Where more than one class of share is received, the rolled-over amount is apportioned between them by reference to their respective market values at the date of acquisition; any proportion of the net gains attributable to non-share consideration (such as cash or loan notes) remains chargeable in the year of transfer.