188体育

The basic mechanics of incorporation relief in a straightforward case are illustrated in the example below.

A transferred his business with all its assets to X Ltd in consideration for an issue of 8,000 shares in X Ltd. Liabilities in the sum of 拢15,000 were transferred with the business.

The balance sheet of the business was as follows:

听	拢	听	拢
听	Business assets:	听	听
听	听	听	听
Capital & Reserves	70,000	non-chargeable	49,000
Creditors	15,000	chargeable (at cost)	23,000
听	cash	13,000	听
听	85,000	听	85,000

It was agreed in the course of the negotiations that the current market values of the assets of the business were:

non-chargeable assets	拢55,000
chargeable assets	拢50,000

and these values were adopted for the purpose of determining the consideration payable to A.

Gains on the transfer of chargeable assets:

听	拢
Market value on transfer	50,000
Less Cost	23,000
听	27,000

The whole of the consideration received by the transferor in exchange for the business was 8,000 shares in X Ltd.

The value of the shares was 拢103,000:

听	拢
Non-chargeable business assets	55,000
Chargeable business assets	50,000
Cash	13,000
听	118,000
Less creditors	15,000
Value of consideration	103,000

Proportion of aggregate net gains appropriate to the consideration in shares:

Gains	拢27,000 x	103,000(A)	= 拢27,000
听	103,000 (B)	听	听

The base cost of the shares to be used on the occasion of their disposal is 拢76,000 (拢103,000 - 拢27,000).