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Disincorporation Relief - Let it Be!

Mark McLaughlin tries to hide his disappointment regarding the government's consultation on helping companies disincorporate.

I have just had an initial look at the HM Treasury consultation document on disincorporation relief, which was published on 7 June 2012 ('disincorporation' is the broad term given to the process of a business changing its legal form from a limited company to self-employed).

At first, I thought it rather strange that the consultation document was only published by the Treasury (not jointly with HM Revenue & Customs (HMRC)), and that it doesn't feature on HMRC's website. However, the document makes clear that it's by no means certain that a disincorporation relief will be introduced at all. A final decision on introducing a relief will only be taken after the consultation, which ends on 30 August 2012. So presumably there is no need for HMRC to become involved at this point.

For anyone expecting a disincorporation relief to be the 'cure all' solution for all business owners wishing to cease operating through a limited company, I would urge them not to build up their hopes too much! It looks very much like any relief may be restricted to very small ('micro') companies, or will be available for a limited time period, or will be limited in the scope of tax charges it covers; or perhaps a combination of the above. In addition, the government seems rather anxious to ensure that any measures to ease the disincorporation process do not increase the scope for tax avoidance, or reduce creditor protection.

It is tempting to predict that disincorporation relief, if introduced, will be as disappointingly restricted in its scope as the recently introduced statutory relief to replace Extra Statutory Concession C16 on the dissolution and striking off of a company. However, given that negative comments may only discourage the government, I would instead simply appeal to the Government to consult fully over a reasonable period of time on the technical detail of the relief, and particularly about any restrictions it wishes to impose on the relief.

The consultation document on disincorporation relief can be accessed via the HM Treasury website: Consultation on a Disincorporation Relief. Interested parties have plenty of time to review the document and have their say before the consultation period ends.

Best wishes,

Mark McLaughlin

Managing Editor