1. Define the commercial objective and the actual arrangement
Start with why ownership is being changed: reinvestment, succession, borrowing, administration or a different long-term business model. Then document who owns the properties, who performs the work, how profits and decisions are shared, and what the historic accounts and agreements show.
A tax analysis should describe the arrangement that genuinely existed. A new partnership deed or tax-return label cannot, by itself, rewrite years of co-ownership.
2. Test the CGT business and transfer conditions
Incorporation Relief can defer gains where a business is transferred as a going concern with all its assets, other than cash if excluded, to a company in exchange wholly or partly for shares. Property letting is not automatically a business for this purpose.
Review the scale, continuity and organisation of activity, what the owners actually do, and the degree to which agents carry out the work. There is no single statutory hours test that guarantees the result.
3. Run the SDLT analysis separately
CGT Incorporation Relief does not remove SDLT. A transfer to a connected company can be charged by reference to market value or relevant debt even where little cash changes hands.
The partnership provisions use their own definitions and formulae. Establish whether a genuine partnership exists, identify the partners and relevant ownership proportions, and model the statutory calculation. Avoid beginning with a desired SDLT number and constructing the facts around it.
4. Build one contemporaneous evidence file
- Ownership records, tenancy arrangements and historic accounts.
- Partnership agreement, bank records, profit-sharing and decision evidence.
- Owner activity logs, agent responsibilities and correspondence.
- Independent valuations and a schedule for every property and liability.
- Board, share, legal, accounting and tax documents that describe the same transfer.
Contradictions between the legal completion statement, accounts and relief computation create unnecessary risk.
5. Make finance and legal completion part of the tax model
Obtain lender consent and company borrowing terms before treating a plan as implementable. Check early repayment charges, personal guarantees, security, loan-to-value limits and whether the debt will actually move.
Coordinate the solicitor, lender, valuer and tax adviser around one step plan. The transfer date controls valuations, claims and reporting, so documents signed at different times need deliberate treatment.
6. Compare incorporation with doing less
Model at least three routes: retain the current properties personally, place only future acquisitions in a company, or transfer the established business. Compare transfer taxes, refinancing, annual cash retention, extraction, future sales and succession.
The best route may be the one with fewer irreversible steps. A long-term company benefit does not automatically outweigh an immediate CGT, SDLT or finance cost.
Official sources and further reading
These primary sources support the framework above. Check the current version before acting because tax law and HMRC guidance can change.