The conditions necessary for the transfer to qualify are:
- the business is transferred as a going concern
- the business is transferred together with all the assets of the business, or all the assets other than cash
- the total open-market value* of the qualifying assets of the business included in the transfer does not exceed £100,000
- all the shareholders to whom the business is transferred are individuals
- each of these shareholders held shares in the company throughout the period of 12 months ending with the business transfer date.
(*Market value means the price that an asset might reasonably be expected to fetch on a sale in the open market.)
A ‘qualifying asset’ means:
(a) goodwill, or
(b) an interest in land which is not held as trading stock.
An individual includes a member of a partnership, but does not include an individual acting as a member of a limited liability partnership.
Sections 58 to 61 Finance Act 2013 are effectively a mirror image of section 162 and 162A Taxation of Chargeable Gains Act 1992 (incorporation relief).
Section 61 inserts new sections 162B and 162C into that act; these deal with the situations where goodwill was recognised pre-Finance Act 2002 and post-Finance Act 2002 respectively.