Section 162 Incorporation Relief: the “20 Hours a Week” Rule Is a Myth

There is no 20-hour rule. Section 162 of the Taxation of Chargeable Gains Act 1992 contains no minimum number of hours, no weekly measure, and no requirement that the owner does the work personally. The figure that circulates in adviser commentary and landlord forums came from the facts of one case, not from the statute.

This matters because incorporation is being marketed hard to leveraged landlords, and "do you do 20 hours a week?" has become a shorthand for whether relief is available. It is not the test.

Position stated is correct as at 31 July 2026.

What Section 162 actually says

Section 162 defers a capital gains charge where a person transfers a business to a company as a going concern, together with the whole assets of the business, in exchange for shares. The gain is rolled into the base cost of the shares rather than taxed at the point of transfer.

The word doing the work is "business". The statute does not define it, and it does not qualify it with any measure of time or effort. As the Upper Tribunal put it in Ramsay:

"There is nothing in the TCGA which can colour the extent of the activity which for the purpose of s 162 may be regarded as sufficient to constitute a business."

Why landlords care at all traces back to Section 24 of the Finance Act 2015, which removed the ability of individual landlords to deduct mortgage interest and replaced it with a 20% credit, while companies continued to deduct interest in full. We cover that mechanism and the arithmetic in our guide to the UK landlord mortgage interest deduction.

Where the "20 hours" figure came from

It came from Elisabeth Moyne Ramsay v HMRC [2013] UKUT 0226 (TCC), an Upper Tribunal decision of Judge Roger Berner. Mrs Ramsay transferred a property containing ten flats to a company and claimed Section 162 relief. HMRC argued the letting was not a business.

At paragraph 13 of the judgment, the Tribunal recorded that it was not disputed by HMRC that Mrs Ramsay and her husband spent approximately 20 hours a week carrying out the various activities described in evidence — cleaning, maintenance, garden and communal area work, dealing with tenants, arranging insurance, and so on.

That is a finding of fact about one couple and one building. It was never held to be a threshold. Nothing in the decision says that 20 hours is the line, that fewer hours fails, or that more hours succeeds. The number has since been repeated so often that many landlords believe it is a rule.

Keep the record that answers the question. Whether a letting operation looks like a business is judged on evidence — what was done, when, and by whom. LetSorted keeps inspections, repairs, contractors, costs and compliance documents dated in one place. See how property management works →

What the Tribunal actually tests

Ramsay set out the approach. The Tribunal drew on the factors from Customs and Excise Commissioners v Lord Fisher — whether the activity is a serious undertaking earnestly pursued, actively pursued with reasonable or recognisable continuity, has a certain amount of substance in terms of turnover, and is conducted in a regular manner and on sound and recognised business principles.

Two passages carry most of the weight. At paragraph 61:

"It is the degree of activity as a whole which is material to the question whether there is a business, and not the extent of that activity when compared to the number of properties or lettings."

And the formulation most often applied since, at paragraph 67:

"where the degree of activity outweighs what might normally be expected to be carried out by a mere passive investor, even a diligent and conscientious one, that will in my judgment amount to a business"

The appeal was allowed. Letting can be a business for Section 162 purposes. Whether a given portfolio clears that bar is a question of fact, and the answer depends on evidence of what is actually done rather than on a stopwatch.

A separate June 2026 decision on the meaning of "business"

On 12 June 2026 the Upper Tribunal (Tax and Chancery Chamber) handed down HMRC v GCH Corporation Ltd and others [2026] UKUT 219 (TCC), before Mr Justice Johnson and Judge Greenbank. HMRC's appeal was dismissed, and the taxpayers' cross-appeal was also dismissed.

This is not a landlord case. It concerned a limited liability partnership used in a loan note capital gains mitigation arrangement, and the question was whether the LLP was carrying on a "business with a view to profit" for the purposes of section 59A TCGA 1992. There was no property letting in it. The official summary reads: "CAPITAL GAINS TAX – limited liability partnership – whether carrying on business with a view to profit – section 59A Taxation of Chargeable Gains Act 1992 – yes – appeal dismissed".

Two points from it are being read across to landlord incorporation. First, the Tribunal held that "business" in section 59A takes its ordinary commercial meaning and encompasses an investment business where it is carried on as a commercial activity — so "business" is broader than "trade". Second, the fact that the structure was set up in part to facilitate a tax mitigation scheme was not enough, by itself, to stop the activity being a business.

Read that across with care. The Tribunal itself stressed the critical importance of the statutory context to the meaning given to "business" in any particular provision. Section 162 has its own line of authority, of which Ramsay is the leading example. GCH is useful support for the general proposition that investment activity can be a business; it is persuasive rather than decisive on Section 162.

What none of this settles

Because it is being presented in some quarters as though the incorporation question is now closed, it is worth being plain about what remains open:

• Whether your own letting activity is a business. That is a factual question about your portfolio, not something a reported case answers for you.
• Stamp Duty Land Tax. Section 162 addresses capital gains. It does not remove an SDLT charge on the transfer, and the multiple dwellings and partnership positions are separate questions.
• Lender consent. Buy-to-let mortgages frequently cannot be novated to a company. How liabilities are dealt with on incorporation is a live issue in its own right.
• Any existing DOTAS position. If Scheme Reference Numbers have been issued in relation to arrangements you have entered into, that is a distinct matter with its own obligations and deadlines.

There is also a separate First-tier Tribunal case concerning HMRC's use of the DOTAS legislation in relation to incorporation arrangements, heard over ten days in February 2026. As at 31 July 2026 no decision in that case has been published. A First-tier decision would in any event be first-instance only — persuasive rather than binding, and open to appeal to the Upper Tribunal. We will cover it once the judgment is available to read.

For the wider picture on what a landlord owes and can claim, see our guide to landlord tax obligations.

Frequently Asked Questions

Is there a 20 hour a week rule for landlord incorporation relief?

No. Section 162 TCGA 1992 contains no minimum number of hours. The figure comes from Elisabeth Moyne Ramsay v HMRC [2013] UKUT 0226 (TCC), where it was an undisputed finding of fact that Mrs Ramsay and her husband spent about 20 hours a week on the property. The Upper Tribunal did not turn that fact into a threshold. It held that what matters is the degree of activity as a whole, judged on the facts of each case.

Does letting property count as a business for Section 162 relief?

It can. In Ramsay the Upper Tribunal held that the taxpayer's property letting activity did amount to a business for Section 162 purposes, and allowed the appeal. The test applied was whether the degree of activity went beyond what a mere passive investor, even a diligent and conscientious one, would normally do. Whether any particular portfolio meets that test is a question of fact for a qualified adviser to assess.

What is the difference between a First-tier Tribunal and an Upper Tribunal decision?

A First-tier Tribunal decision resolves the dispute between those parties but does not bind other tribunals — it is persuasive only, and it can be appealed to the Upper Tribunal. An Upper Tribunal decision is a binding precedent on the First-tier Tribunal and carries considerably more weight. This is why an Upper Tribunal ruling such as Ramsay or GCH matters more to the general position than a first-instance decision does.

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This article reports what the Tribunals have decided. It is general information, correct as at 31 July 2026, and is not tax or legal advice. It is not a recommendation to incorporate or not to incorporate. Tax treatment depends entirely on individual circumstances, and incorporation carries SDLT, lender and administrative consequences that are outside the scope of this article — take advice from a qualified accountant who has seen your full position before acting.