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Buying a business - capital allow's and CGT?

Hi everyone,

Tax isn't my bag but I am trying my best to learn. There's one issue I haven't been able to get my head round.

Say somebody purchases an unincorporated business. The deal is £10,000 and this is for the general FFE of the business.

Does this transaction immediately have two implications with capital allowances and CGT?

I.e. the £10k is a business expense for qualifying capital assets. Thus, in year 1 the 10k can be claimed under AIA reducing profit.

Then, down the line, if the person sells the unincorporated businss they are liable to pay CGT on the proceeds less the original cost - ignoring any relevant reliefs.

The deemed cost would then be the original £10k the business was purchased for.

Is this right?

A massive thank you for any responses that are helpful and sorry to ask what must be for many a very basic question but as I said tax is not my strong suit at the moment.


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21st Nov 2011 10:43

Just remember that if it's goodwill that has been purchased this tax relief can only be claimed by companies.


Other than that I think everything you have said is correct but to be honest I have only scanned it as I'm in a rush.


Anyone else?

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21st Nov 2011 16:56

Look at the figures submitted by the old owner to get an idea of what is a fair split of the £10,000. If the plant and equipment etc is very old then it is probably worth little, which means that most of the £10,000 will be goodwill and thus not eligible for tax deduction (except for CGT when/if the business is sold at a later date).


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