Incorporation Relief and Assets Held Outside a Partnership

[HectorsFolly]

Hi,

Incorporation Relief (s162) applies to the "assets OF a business".

I infer this to mean that, if a partnership incorporates its eligible business, and that there are also assets used by the business, but held outside the partnership by individual partners, then these are not assets of the partnership's business, so Incorporation Relief cannot apply to them.

Although I don't think the logic is necessarily linear, I think it is relevant that I have never heard of Incorporation Relief having been denied because a Partner did not want to incorporate the business premises that he owned personally, etc. (so that HMRC would have said "You're not incorporating all of the business' assets, so you cannot have Incorporation Relief").

But on the other hand I could see that, since the government was trying to make it easier for businesses to incorporate, they might say "sure you can have the asset held personally as well, why not - where's the harm?"

Many thanks,

HF

[AnthonyR]

I think you'll need to identify whether it's an asset which is part of the business or it's an asset used by the business. Is the asset owned by the partnership and dealt with under the partnership agreement or is it simply made available (let?) to the partnership?

If it is owned externally then I would suggest that it doesn't represent part of the business and wouldn't benefit from s162, but at the same time it would not be necessary to transfer to ensure that the whole of the business is transferred.