HMRC issued guidance on how business owners can transfer a company’s assets and operations to themselves, outlining tax implications for both companies and shareholders.
The UK’s HM Revenue & Customs (HMRC) has published a guidance, on 1 December 2025, for business owners on how to disincorporate a company and continue running its business directly, either as a sole trader or partnership. The guidance also applies to companies used for charitable or other not-for-profit purposes.
Business owners can transfer a company’s business and assets—including stock, land and property, vehicles, goodwill, and debtors—to themselves or other shareholders. Once the business is no longer run by the company, owners may choose to:
- Close the company, through striking off or a members’ voluntary liquidation; or
- Keep the company, either making it dormant or using it for other purposes.
HMRC stresses that the company and its owners remain separate legal entities, meaning such transfers are likely to have tax implications for both parties. Professional advice is recommended, particularly if the company holds significant assets or is registered for VAT or PAYE.
Tax Considerations for the Company
Corporation Tax
Whether the company is closed or kept affects Corporation Tax obligations. Companies that remain active or dormant must continue to file Corporation Tax returns and submit accounts to Companies House. Before closing, the company must meet all outstanding Corporation Tax obligations.
Transfer of Assets
When disincorporating, assets must be valued at market value on the date of transfer. Gains are subject to Corporation Tax, not Capital Gains Tax. For example, if an asset worth GBP 1,000 is transferred for free, the company must calculate its gain as if it were sold at GBP 1,000. Professional valuation may be required.
Trading Losses
Trading losses cannot be transferred to individuals taking over the business. Companies may be eligible for Terminal Loss Relief, allowing final-year trading losses to be carried back against profits from the previous three years.
PAYE
Businesses registered for PAYE should follow HMRC guidance on merging or changing operations.
VAT
VAT is generally not chargeable when a business is transferred as a going concern, provided certain conditions are met. Companies moving from limited company status to a sole trader or partnership may need to transfer VAT registration, or alternatively, cancel and re-register under the new legal structure.
Tax Considerations for Shareholders
Income Tax and Capital Gains Tax
Shareholders may be liable for Income Tax or Capital Gains Tax on distributions from the company, including dividends or assets transferred to themselves or connected persons.
- If the company is kept dormant or used for other purposes, distributions are typically treated as income and subject to Income Tax.
- If the company is closed, tax treatment depends on the closure method:
- Members’ voluntary liquidation: distributions are generally treated as capital, subject to Capital Gains Tax.
- Voluntary striking off: distributions before the company is struck off are normally treated as income, subject to Income Tax.
Special Rules and Anti-Avoidance Provisions
Special rules may apply to prevent tax avoidance, including:
- Anti-avoidance rules for distributions during a members’ voluntary liquidation if the shareholder continues the same or similar trade.
- Anti-avoidance rules for distributions made before striking off.
- Transactions in securities legislation, which may treat certain distributions as income.
HMRC allows statutory clearance applications to clarify whether these rules apply.
Stamp Duty Land Tax, Stamp Duty, and Stamp Duty Reserve Tax
- SDLT may apply when a company transfers land to its shareholders, based on the chargeable consideration.
- Stamp Duty or Stamp Duty Reserve Tax may apply to shares transferred by the company. Shares given for free generally do not attract duty unless they are listed and the market value rule applies.
HMRC advises UK business owners to seek professional advice to ensure compliance with all tax obligations, especially for companies with significant assets or specific VAT/PAYE registrations.
