Implications of incorporation on UK tax

The transfer of business assets and the business activity of a sole trader or a partnership into a company is known as incorporation. The UK income tax and UK national insurance contributions (NIC) implications of incorporation for sole traders and partnerships include:

1. 听

   鈥⑻� balancing adjustments may arise on plant and machinery however the trader can elect to transfer plant and machinery to the company at tax written down value (CAA 2001, s 266) (see UK2.2.4)

2. 听

   鈥⑻� stock is transferred at market value unless the trader makes an election to transfer it at the higher of cost or price paid (ITTOIA 2005, ss 177鈥�178)

3. 听

   鈥⑻� the owner as director of the company becomes liable to tax on benefits-in-kind in respect of private use of business assets (as opposed to these costs being disallowed as a deduction from profit)

4. 听

   鈥⑻� there are several options to utilise any losses the unincorporated business has incurred (see UK2.8.4)

5. 听

   鈥⑻� the trader no longer