Incorporation relief is the rule that defers the capital gain when you transfer a private medical practice into a limited company. Section 162 of the Taxation of Chargeable Gains Act 1992 (TCGA 1992) rolls the gain on your practice goodwill into the base cost of the shares you receive, so the tax waits until you dispose of those shares.
For transfers made on or after 6 April 2026 you have to claim it, and a missed claim leaves the whole gain chargeable now.
Why does moving a private practice into a company create a capital gain?
You and your company are connected persons for capital gains purposes, so the assets you transfer are treated as changing hands at market value, whatever figure your paperwork carries. The largest is usually goodwill, which HMRC describes at CG68010 as the attractive force that brings in custom.
Goodwill you built up yourself was never bought, so it carries little or no cost against that market value. The gain can be substantial though you have sold nothing.
Scope decides half the answer. An NHS GMS contract needs shareholders who all qualify under section 86(3) of the National Health Service Act 2006, so an ordinary personal service company cannot hold one. PMS contracts sit under section 92 with their own rules.
The sale of NHS practice goodwill has been prohibited since 1 April 2004, now under SI 2019/251, which also blocks selling shares whose value includes it. Your private goodwill can be transferred and NHS goodwill cannot, so section 162 is private-practice territory only. See whether GP practice goodwill can be sold.
How does section 162 incorporation relief work?
The mechanism is a roll-over: the gain moves onto another asset instead of being taxed now. Section 162(2) deducts it from the aggregate of chargeable gains less allowable losses, and section 162(3)(b) reduces the sum you may later deduct as the cost of the shares under section 38(1)(a). HMRC sets the relief out from CG65700 of its Capital Gains Manual.
A deferral, not an exemption
The base cost of your shares is the figure you deduct from the proceeds when you sell them. Reduce it and you enlarge the gain on that future disposal, which is where the tax lands.
The relief buys timing, and it is worth most if you have no near-term plan to sell. Model the eventual share disposal first.
The fraction that decides how much is deferred
Section 162(4) does the apportionment. Your gain is multiplied by A over B, where A is the cost of the new shares and B is the value of the whole consideration received for the business.
Take the entire consideration in shares and A equals B, so the whole gain rolls over. Take part of it as a credit to a director's loan account, a balance the company owes you and you can draw later, and that proportion is chargeable in the year of transfer. The amount rolled over can never exceed the cost of the shares.
What the share and loan-account split does to the numbers
Take Dr K, an illustrative hospital consultant transferring a private clinic worth £400,000. The figures are rounded to show the mechanic and are not a quote for any real practice.
The inputs: private goodwill at a market value of £400,000, with a nil cost because it was built up in the practice. Nothing else chargeable moves and no liabilities go across. The consideration is £300,000 in shares and £100,000 credited to a director's loan account.
The gain is £400,000 less nil, so £400,000. A is £300,000 and B is £400,000, a fraction of three quarters. The deferred amount is £400,000 multiplied by three quarters, so £300,000, which does not exceed the £300,000 cost of the shares.
That leaves £100,000 chargeable in the year of transfer, reduced by the annual exempt amount of £3,000 for 2026/27 to £97,000 taxable. The base cost of the shares becomes nil, so the deferred £300,000 resurfaces in full when the shares go.
Take the whole £400,000 in shares and the chargeable slice disappears, along with the loan account Dr K could have drawn on.
What conditions must the transfer meet?
Section 162(1)(a) sets three, listed by HMRC at CG65710, and all have to hold on the same transfer.
| Condition | What it requires | Where the detail sits |
|---|---|---|
| Going concern | A business, transferred as a live operation | CG65710 |
| Whole assets | All the assets of the business, or all of them other than cash | CG65710 |
| Shares | Consideration satisfied wholly or partly by an issue of shares to the transferor | CG65720 |
A business transferred as a going concern
Something more than a collection of assets has to move. HMRC adopts the description of a going concern as a business whose doors are open, active and operating, as against an inert aggregation of plant.
HMRC cites CIR v Gordon for the limit: a business is not a going concern where the transferor has taken steps beforehand to stop the company carrying it on without interruption. An active private clinic clears this; one wound down and reconstituted does not.
All the assets of the business, cash apart
Either every asset goes across, or every asset except cash and bank balances. You cannot keep back the profitable pieces and still claim the relief.
CG65710 makes one point that catches practices out: assets absent from your balance sheet still count, and goodwill generated in the business without ever having been bought is the obvious example.
Consideration wholly or partly in shares
The shares have to be issued as consideration for the business. Subscribing for shares as a separate matter does not qualify, and neither does converting a loan-account balance into shares under a later agreement (CG65720).
HMRC expects the issue reasonably promptly, and shares are not treated as issued until the allotment is registered. Value left owing to you on a loan or current account counts as consideration other than shares, which is what restricts your relief.
Liabilities taken over, and ESC D32
Business liabilities the company assumes would strictly be extra consideration, cutting your relief. ESC D32 lets them be ignored when quantifying the other consideration, because you receive no cash to pay the tax and the shares are worth less than if the business moved unencumbered (CG65745).
It covers business liabilities only, so a personal liability the company takes on, including any tax on the transfer itself, stays part of the consideration. Nor does it apply when the net cost of your shares is computed (CG65740).
What changed for incorporation relief on 6 April 2026?
Finance Act 2026 (c. 11) received Royal Assent on 18 March 2026. Its section 39, headed "Incorporation relief: requirement to claim", amends TCGA 1992 section 162, and section 39(5) fixes the scope: the amendments "have effect in relation to transfers of businesses made on or after 6 April 2026".
The claim, in the statute's own words
Section 39(2)(b) inserts a new section 162(1)(b). Relief now applies only where the person "makes a claim in respect of the transfer, including such information as the Commissioners may require". That claim must come "on or before the first anniversary of the 31 January following the tax year in which the transfer of the business took place".
For a transfer in the 2026/27 tax year that is 31 January 2029. It reads like a comfortable window and it is the kind that slips, because an incorporation feels finished long before the claim is due.
What the claim has to contain
HMRC sets its expectations out at CG65735. You will usually claim in or with the tax return for the year of transfer, and box 54 of the paper SA108 takes it. There is no prescribed format for the supporting detail, provided the claim is in writing, and Helpsheet HS276 is being updated for 2026/27 onwards.
- Which disposals of chargeable assets the claim covers, and the total relief claimed.
- A description of the business transferred, and whether the transferor is an individual, a trustee, a partnership or an LLP.
- The company's name and its company registration number.
- The number and type of shares issued, and the date of issue.
- The chargeable assets and their values at transfer, the total value of the non-chargeable assets, and the initial cost of the new shares.
- The value of any consideration in a form other than shares.
The section 162A election has gone
Section 39(4) omits section 162A, the election for section 162 not to apply. It existed because relief used to be automatic and there had to be a way of switching it off, for instance to crystallise a gain deliberately.
With relief now opt-in, you decline it by not claiming. Guidance written before spring 2026 still presents the election as a live choice, and on a transfer from 6 April 2026 you have no election to make.
| Transfers before 6 April 2026 | Transfers on or after 6 April 2026 | |
|---|---|---|
| How relief applies | Automatically, where the conditions are met | Only where a claim is made under section 162(1)(b) |
| Deadline | No claim to make | First anniversary of the 31 January following the tax year of transfer, so 31 January 2029 for a 2026/27 transfer |
| Declining the relief | Election under section 162A | Section 162A omitted, so you decline by not claiming |
| Information to HMRC | None | Such information as the Commissioners require (CG65735) |
How is private medical goodwill valued?
Your valuation sets both the deferred gain and the future base cost of the shares, which makes it the figure HMRC is most likely to test. Disputed values go to Shares and Assets Valuation (CG65740).
The medical question generalist guidance skips is where the earning power sits. CG68010 states that goodwill attributable to the personal skills of the proprietor "will not be transferred to the new proprietor". Where it is claimed to have moved because the individual is tied in under an employment contract, HMRC expects a referral to its CG Technical Group.
So a practice carried by one clinician's name and personal referrals is a different asset from a clinic with a booked patient base, insurer recognition and other treating clinicians. CG68020 records that professional goodwill is "likely to be closely associated with the client base" and is normally measured by fee income.
The durability and concentration of your private income are what a valuation has to answer. A multiple borrowed from another sector, dental practices included, is not a starting point.
Free Incorporation and private practice tool
Model your tax saving from incorporating your private practice
Our interactive tool is built for a larger screen. Tell us your situation and one of our medical accountants who works with doctors will pick it up, so a specialist medical accountant there can send your figure and the sensible next step. Enquiring commits you to nothing.
Want this checked against your specific situation?
Leave your details and a one-line summary. One of our medical accountants who works with doctors reads it and makes contact. Enquiring commits you to nothing.
Disposal date and the 6 April 2026 dividing line
The date of disposal follows the contract. An unconditional contract is dated when it is made (TCGA 1992 section 28(1)); a conditional one is dated when every condition is satisfied (section 28(2)). CG14250 confirms this date fixes the tax year of the gain, the deadline for declaring it and the annual exempt amount available to you.
Where an incorporation straddled 6 April 2026, your transfer date decides which regime governs it, so pin the contract down on paper.
Should you defer the gain or crystallise it now?
Section 162 suits you if you are carrying the private business on through a company. Crystallising the gain instead and claiming Business Asset Disposal Relief suits an exit, subject to its own conditions and lifetime limit, covered in the guide on selling a private medical practice and claiming BADR.
The fork is continuing against exiting. To put your own figures against it, the private practice incorporation calculator runs the comparison.
Company income is never NHS-pensionable, so price the accrual you give up alongside the deferral, using the pairing set out in the step-by-step incorporation guide.
Where section 162 claims go wrong
- Assuming the relief still arrives automatically. On a transfer from 6 April 2026 it does not, and an unclaimed gain is taxable in the year of transfer.
- Treating the deadline as remote. Your window to the first anniversary of the 31 January following the tax year of transfer closes quietly.
- Valuing your private goodwill on a borrowed multiple, which invites challenge and distorts the deferred gain and the future share base cost.
- Taking value out through a director's loan account without pricing what it does to the section 162(4) fraction, which the consultant's director's loan account guide picks up.
- Forgetting the deferral resurfaces, so a later share sale carries a larger gain than the shares' price history suggests.
See also corporation tax for a medical company and the case for a medical limited company.
Support for doctors incorporating private practice
We work with consultants and GPs moving the private side of a practice into a company. That means modelling the section 162 deferral against an outright disposal, valuing the private goodwill so it will stand up, setting the consideration mix deliberately, and getting the claim in on time.
To talk it through, the short form below is the place to start.