Section 162 Incorporation Relief: a new claim requirement, not the end of the relief

A significant change has now taken effect for landlords and other business owners transferring a qualifying business to a company.

For transfers completed on or after 6 April 2026, Incorporation Relief under Section 162 TCGA 1992 no longer applies automatically. Instead, each relevant transferor must actively claim the relief through their Self Assessment tax return for the tax year in which the transfer takes place.

This is an important administrative change, but it is equally important to understand what has not changed.

Section 162 Incorporation Relief has not been abolished. A qualifying business can still be transferred to a company with the relevant capital gain rolled into the shares received. Property118’s Reassure Incorporation service also remains available.

The change means that greater attention must now be given to the claim, the supporting calculations and the evidence retained at the time of incorporation.

From automatic relief to an active claim

Before 6 April 2026, Section 162 relief arose automatically where the statutory conditions were satisfied. There was no standalone application for the relief and no requirement to ask HMRC to approve the incorporation.

The transaction still needed to be correctly implemented, calculated and reported. However, the legislation did not require the transferor to make a separate claim.

Under the new rules, the transferor must make the claim in their Self Assessment return. HMRC has said that claimants will be required to provide:

• brief details of the incorporation transaction;
• the relevant tax computations; and
• the type of business transferred.

The new requirement applies to transfers taking place from 6 April 2026. It does not retrospectively impose a new claim requirement on qualifying transfers completed before that date.

The earlier clearance approach

Property118’s experience of preparing evidence for HMRC goes back considerably further than the new rules.

In the earlier years of our incorporation work, detailed non-statutory clearance submissions were frequently prepared and sent to HMRC before transactions were implemented. These explained the proposed arrangements, the commercial background, the nature of the property business and the relevant interpretation of the tax legislation.

Those submissions were an additional evidential and professional safeguard. They were not the statutory mechanism through which Section 162 relief was obtained, because the relief itself remained automatic where its conditions were met.

HMRC’s non-statutory clearance service is intended for cases involving genuine uncertainty about how legislation applies. It is not a general confirmation service and HMRC will not provide clearance on questions of fact, such as whether particular activities amount to a business.

As advance clearance became less readily available for these matters, incorporations generally proceeded without an advance view from HMRC. The relevant evidence nevertheless remained important in the event of a subsequent enquiry.

What should now be prepared?

The documents formally required with the claim will depend upon HMRC’s reporting process. In addition, we consider it prudent to assemble and retain a comprehensive evidence file at the time of incorporation.

Depending upon the circumstances, this should include:

• professional valuations of the properties and other relevant business assets;
• mortgage statements showing the liabilities connected with the portfolio;
• evidence of the activities through which the property business was conducted;
• records of the commercial reasons for incorporating;
• executed legal and company documentation; and
• the calculations supporting the amount of relief claimed.

Not every document will necessarily be submitted with the tax return. However, evidence prepared contemporaneously is generally more persuasive than records reconstructed several years later after HMRC has opened an enquiry.

Where the FTT decision fits in

Property118’s recent First-tier Tribunal success remains highly relevant, but for a different reason.

The Tribunal considered whether the Substantial Incorporation Structure and Capital Account Restructure arrangements were notifiable under DOTAS. It allowed the appeals and cancelled HMRC’s decisions to allocate Scheme Reference Numbers.

In reaching its decision, the Tribunal examined the arrangements and their commercial context in considerable detail. That included the costs and practical disadvantages of immediate refinancing, the preservation of existing mortgage terms and the ability of landlords to retain access to capital accumulated within their businesses.

The FTT ruling provides valuable clarity about the DOTAS treatment of the arrangements. It does not, however, constitute a blanket determination that every individual client qualifies for Section 162 relief. Entitlement continues to depend upon the facts of each business and the proper implementation and documentation of each transfer.

That distinction reinforces the importance of the new claims process rather than diminishing the value of the Tribunal decision.

Experience matters under the new rules

Over more than a decade, Property118 and the professionals with whom we work have dealt with advance clearance submissions, completed incorporations, HMRC compliance checks, Discovery Assessments and a full ten-day FTT hearing.

We continue to engage with HMRC through established professional channels and to present clients’ positions clearly, transparently and with appropriate supporting evidence.

The new claim requirement introduces an additional compliance step. It does not remove the underlying relief or invalidate properly structured incorporation planning.

Our procedures are being adapted to ensure that the claim, calculations and evidence are addressed as an integral part of every relevant incorporation.

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Sources and why they matter

Section 39, Finance Act 2026

This is the legislation introducing the requirement to claim Incorporation Relief. It amends Section 162 for transfers taking place from 6 April 2026.

HMRC: Incorporation Relief claims process

HMRC’s policy paper confirms that the claim must be made through the transferor’s Self Assessment return. It also identifies the information HMRC expects claimants to provide.

Section 162, Taxation of Chargeable Gains Act 1992

This is the underlying legislation providing Incorporation Relief. The new rules change the claims process, not the fundamental purpose of the relief.

Property 118 Limited & Anor v HMRC [2026] UKFTT 1111 (TC)

This is the official FTT judgment. The Tribunal examined SIS and CAR, their tax consequences and the commercial circumstances in which landlords used them. At paragraph 187, it allowed the appeals and cancelled HMRC’s decisions to allocate the Scheme Reference Numbers.

The judgment provides important clarity concerning DOTAS and supports the commercial rationale underlying the arrangements. It should be read alongside paragraph 196, which confirms that the DOTAS proceedings did not determine the separate tax position of each individual client.

HMRC: Non-Statutory Clearance Service

This explains the purpose and limitations of HMRC’s clearance service. In particular, HMRC states that it is not a general confirmation service and requires a genuine uncertainty about the application of legislation.

Property118: A Major CGT Bombshell Hidden in the 2025 Budget

This is Property118’s original report identifying the Budget announcement and explaining the practical implications of moving from automatic relief to an active claims process.

Why landlords continue to choose Property118

The landlords who engage Property118 are rarely searching for a clever tax scheme. More often, they are searching for clarity.

They want confidence that the business they have spent years building will continue to to prosper and reassurance that their business can continue beyond their own involvement.

Successful incorporations begin with a clear understanding of what the landlord is trying to achieve. The tax consequences are important and should never be ignored, but the most successful outcomes are almost always driven by commercial objectives rather than taxation alone.

That philosophy continues to guide everything we do today.