Must a claim be made for incorporation relief?

Incorporation relief is a valuable tax relief provided under UK tax law that allows business owners to transfer their trading assets into a company without incurring immediate Capital Gains Tax (CGT) liability. The key feature of incorporation relief is that it is not automatically applied; rather, a claim must be made for it to take effect.

The rationale behind this relief is that it ensures that no tax is payable at the point of incorporation, provided certain conditions are satisfied, such as the existence of a trading business and the transfer of qualifying assets to the new company. However, just meeting these conditions alone does not automatically grant the relief. The business owner must formally submit a claim as part of their tax affairs for the relief to be considered.

Thus, the correct understanding here is that a claim must indeed be made to activate the incorporation relief despite fulfilling the necessary conditions. It highlights the importance of actively managing tax affairs and the requirement to engage with tax claims to benefit from available reliefs effectively.