Tax on disincorporation

Anyone considering ceasing to trade as a company and instead carrying out their business as a sole trader or partnership should be very careful to ensure there are no taxes on disincorporation. Given the changes to the rates of corporation tax, particularly for small companies there may be many business owners considering this. Aside from the issue of whether trading in your own name is more tax efficient or not the actual transfer of assets from a company to you could crystallise a capital gain for tax purposes. You and the company would be connected persons for CGT purposes, and therefore any transfer would be deemed to be at market value. You would therefore need to value any goodwill and other business assets that may be transferred to the new company and calculate a gain in the company. There could also be issues in terms of the transfer of value out of the company. This would usually be a dividend (or a capital distribution if on a winding up) and there could therefore be tax to pay in your capacity as shareholder.