HMRC updates incorporation relief guidance following Finance Act 2026 changes

HMRC has updated its guidance on incorporation relief following changes introduced by the Finance Act 2026. For business transfers taking place on or after 6 April 2026, relief under TCGA 1992 s162 is no longer automatic and must be claimed by the transferor. 

While the change affects the capital gains tax (CGT) process, businesses incorporating property activities should not overlook the separate capital allowances rules that may also apply.

Incorporation relief now requires a claim

The updated guidance confirms that businesses must actively claim incorporation relief. Claims must contain specific transaction information and be submitted by the first anniversary of the 31 January following the tax year of incorporation. For transfers taking place in 2026/27, the deadline will generally be 31 January 2029. 

The previous ability to opt out of automatic relief under s162A has also been removed for transfers made on or after 6 April 2026. 

Capital allowances remain a separate exercise

Although the change relates to CGT, it does not remove the need to consider capital allowances separately.

Property-business incorporations frequently involve fixtures, plant and machinery, and other qualifying expenditure. The transfer of these assets continues to be governed by the Capital Allowances Act 2001 and may require separate elections and supporting documentation.

For connected-party incorporations, a joint election under CAA 2001 s266 may be available to allow capital allowances to continue without triggering balancing adjustments. HMRC guidance confirms that, where a valid election is made, the successor effectively inherits the predecessor's tax history for the transferred assets.

Why transaction planning matters

Businesses and advisers will need to consider both the CGT and capital allowances position simultaneously.

This often means coordinating:

• the new s162 incorporation relief claim
• any s266 connected-party succession election
• fixture transfer arrangements and any s198 election
• the transfer of any applicable SBA allowance statement to the successor company
• supporting valuations and transaction records.

Failure to address one part of the transaction may not affect the validity of the others. However, it could produce unintended tax outcomes or restrict future claims.

Conclusion

The Finance Act 2026 changes do not alter the underlying capital allowances treatment of a property business incorporation. However, they do introduce an additional compliance requirement that businesses need to manage carefully. 

Businesses should ensure that any s162 claim should be coordinated with, rather than confused with, the separate capital allowances elections that may be required. Early planning can help ensure that reliefs available under both regimes are preserved and documented appropriately. 

For further information on the implications of these changes, please get in touch with your usual Crowe UK contact.