HMRC sets out new claim rules for landlord Incorporation Relief

HMRC has published detailed new guidance explaining exactly what taxpayers must provide when claiming Section 162 Incorporation Relief for business transfers taking place from 6 April 2026.

The change is particularly important for landlords incorporating property businesses because, unlike transfers completed before 6 April 2026, Incorporation Relief is no longer automatic even where all of the underlying statutory conditions are satisfied. Finance Act 2026 amended Section 162 TCGA 1992 so that the transferor must now make a positive claim containing the information required by HMRC.

HMRC has now followed that legislative change with detailed guidance at CG65735, setting out what the claim needs to contain and when it must be submitted.

What landlords will now have to provide

In most cases, HMRC expects the Section 162 claim to be made with the Self Assessment return for the tax year in which the business was transferred.

The taxpayer must identify which disposals of chargeable assets are covered by the claim and the total amount of Incorporation Relief being claimed. Additional information must then be supplied explaining the transaction and supporting the calculation.

HMRC says this should include a description of the activities of the business being transferred, whether the transferor is an individual, trustee, partnership or LLP, and details of the company receiving the business.

The claim must also identify the number and type of shares issued in exchange for the business and the date those shares were issued.

Perhaps most importantly, HMRC expects to see the calculation of the relief itself. That calculation should identify the chargeable business assets and their values at the date of transfer, the total value of non-chargeable assets, any consideration received other than shares and the amount of gain being deferred.

The detailed requirements are set out in HMRC’s new CG65735 guidance.

No valuation of the company shares required

One useful clarification is that HMRC says a valuation of the shares issued by the company is not required or expected for the Section 162 calculation.

That is because the base cost of the new shares is calculated through the Incorporation Relief machinery itself.

This should not be confused with valuations of the properties and other chargeable business assets being transferred. Those values remain fundamental because they are required to establish the gains arising immediately before Incorporation Relief is applied.

There is a new statutory deadline

Finance Act 2026 also introduced a specific deadline for making the claim.

A Section 162 claim must now be made by the first anniversary of the 31 January following the tax year in which the business transfer took place.

HMRC gives the example of somebody transferring a business on 19 July 2026. The transfer falls within the 2026/27 tax year, meaning that the ultimate deadline for claiming Incorporation Relief is 31 January 2029.

That may appear to provide plenty of time, but landlords should be wary of treating it as a reason to postpone the work. Property valuations, business records and transaction evidence are generally much easier to obtain and verify when the incorporation is taking place than several years afterwards.

The 60-day property return can matter much sooner

There is another particularly important point for landlords.

HMRC confirms that a Section 162 claim does not change the rules requiring certain disposals of UK residential property to be reported through the CGT on UK Property Account within 60 days.

Where a UK Property Account return is required, for example where Incorporation Relief is only partially available and some Capital Gains Tax remains payable, HMRC says the amount of relief claimed should be entered in the property return and the supporting Section 162 information should be supplied as an attachment.

The claim must then also be included in the Self Assessment return for the tax year of disposal.

That makes it particularly important for the landlord, accountant and incorporation advisers to understand from the outset who is responsible for each stage of the reporting process.

The underlying Section 162 conditions have not changed

The new claim procedure should not be confused with a relaxation of the conditions for Incorporation Relief.

HMRC’s revised CG65700 guidance continues to state that Section 162 applies where a person transfers a business as a going concern, together with the whole of its assets other than cash, to a company wholly or partly in exchange for shares issued to that person.

What has changed is that satisfying those conditions is no longer enough by itself for transfers from 6 April 2026 onwards. A satisfactory claim must also be made.

This means that the supporting evidence behind an incorporation is likely to become even more important. If HMRC subsequently enquires into a claim, the taxpayer may need to demonstrate not only how the gain was calculated but also why the activities transferred constituted a business, what assets belonged to that business and how the legal transaction corresponds with the figures submitted to HMRC.

Partnerships and LLPs are included

The revised HMRC guidance also confirms that Incorporation Relief can apply where the whole business of a partnership or LLP is transferred to a company as a going concern.

The relief is calculated separately for each individual partner or LLP member, which means ownership records, asset valuations, share allocations and individual Capital Gains Tax computations need to be coordinated carefully.

HMRC’s position on partnerships and LLPs is explained in CG65700.

Why the change matters

Until 5 April 2026, taxpayers generally did not need to make a claim for Section 162 relief because it applied automatically where the statutory conditions were met. A taxpayer who did not want the relief could instead elect under Section 162A for it not to apply.

For transfers from 6 April 2026, Section 162A has been repealed and the process has effectively been reversed. The taxpayer must now actively claim the relief.

HMRC explained when the change was announced that one objective was to obtain better information about Incorporation Relief claims so that it could analyse use of the relief and target compliance activity more effectively. The original policy announcement can be read here.

For landlords considering incorporation, the practical message is straightforward: Section 162 should no longer be regarded as something that simply happens automatically after the legal work has been completed.

The business evidence, valuations, tax computations, share issue and legal documents should be assembled as part of one coordinated process so that the eventual claim can be supported if HMRC asks questions later.

Property118 has prepared two detailed guides explaining the new Section 162 claim process and the information landlords and their professional advisers should retain.

1) Understanding Section 162Incorporation Relief Applications 

2) Section 162 Incorporation Relief Claims

Landlords considering incorporation can also book a Property118 consultation here to discuss their objectives and the professional workstreams that may need to be coordinated.

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