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Date of business transfer to limited company - part disposal?? HELP please!

Sole trader client with two main customers, transferred business to a limited company in spring 2012.

Now trying to complete the valuation and get CG34 valuation clearance but am struggling to know how to proceed.

Customer A contract novated on 31 May with all income after that date going through the limited company.    Customer B took longer to process the paperwork and only novated the contract on 31 July.  This was purely due to administrative problems.

So sole trader has trade in April and May with both customers, then June and July with customer B only.  Limited company has income from customer A in June and July, then both customers A and B from August onwards.

The initial plan had been to transfer the entire business to the limited company on 31 July, when all had been finalised but in reality I suspect we seem to have a part disposal at 31 May and the final disposal at 31 July.  Is there any way to avoid this?  Do I really have to split the business and do two valuations, one at each date, two CG34s etc or am I missing some way round this?

I have prepared an initial valuation report as at 31 July, and have increased the 4 month period to July 12's profit to take into account both contracts for 12 months to get to an annual amount.  But I worry now as the method of doing this shows that one customer novated on 31 May, and is this going to be queried as a part disposal?

Sole trader accounts have been completed to 31 July as that is when the sole trade stops altogether.  If there was a part disposal at 31 May I would presumably have to create another set of accounts to send off with that valuation??

This is my first valuation report and I had the figures reviewed by someone more experienced, who agrees they are reasonable but said the way I have calculated the uplift to a full year looked odd. (I calculated by saying the four months to 31 July included 6 'customer months' (i.e. 2 each in April and May, 1 in June and July) and that the full year would include 24 'customer months' so the uplift should be 3x the original.

HELP!!

PS Yes murphy1 I also have times when I feel like giving it all up!!

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By blok
05th Feb 2013 09:31

this seems rather odd.   I

this seems rather odd.   I have never come accross an incorporation in stages like this.  granted it is possible, but unless the amounts are huge I cant imagine that it is reliastic for small businesses.

if it was me i would take a pragmatic view.  pick one date and value the whole business on that date.  Ok, the paperwork may be a month or two out but hey ho.

if you pick the later date, I woudl transfer the income from the contract A into the company bank and class it as company income, albeit it collected by the sole trader as agent.  if you pick the later date, do the opposite.

the alternative of having staged incorporations may tie you up in knots.

 

 

 

Thanks (1)

If the soletrader...

... and the company were unconnected, there would have been a sale and purchase agreement under which it would have been agreed that the vendor would novate the contracts and in the meantime would act as agent in collecting (and paying over) the debts now due to the purchaser.

It would have been clear that the date of that contract was the date of sale.

And therein lies the problem.

Thanks (1)
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By Luke
05th Feb 2013 10:31

Thank you both

Blok - Yes I have been well and truly tangled in the metaphorical knots!

I think I will go for 31st May as that was the actual intention of the parties involved, it was just administrative mess-ups on contract B that led to it being done on 31 July.

Income from June and July received through the sole trade will be counted as received as agent for the company.

Thank you for your clarification.

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