At about the time of the financial crash my client was working on a civil engineering project. At the end of the contract there was alot of equipment left on site - shuttering/poles/formers/couplings etc -which had been costed into the contract by the supplier and was not wanted by the customer. My client's offer to remove this from site at his own expense was accepted and he has stored the equipment since. Recently he has identified an opprtunity to hire out the equipment commercially and so has introduced it into his Ltd company at a professional market valuation of c.£70K (the difference in value being dictated by market conditions ruling at the time).
The equipment consists of literally hundreds of pieces each with a small value which is not dependent on other similar pieces.
My question is how to present the transfer to the Ltd company in my client's tax return in the most tax efficient manner.
Thanks
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Sounds like wasting assets to me. Since wasting assets are exempt from CGT that soumds pretty tax efficient.
The question that does need to be asked, though: since he was prepared to pay for the items, presumably he was expecting some sort of return on his 'investment'? So exactly what were his intentions when he acquired them?
Thanks. It seems that he thought it was a shame it would be scrapped and that the stuff may have a future use. Do you think this signifies an intention to trade or suchlike? Does that spike the wasting assets route?
There was a case (although I'm buggered if I can find it), where somebody bought a large quantity of parachute cord (presumably because they thought it might become useful(, and then sold it at a profit, who was held to be trading.
There have been similar findings in relation to large quantities of (a) paper in Rutledge v CIR 14 TC 490, and (b) whisky in CIR v Frase 24 TC 498.
What is his argument for introducing them [into his own company] at a higher value than his base cost?
If he has no self employment in which to use the assets his argument for acquiring them personally, if not to make a future profit, seems a bit thin.
He has made a profit from assets associated with his employment ... if he wants the uplift in value... pay the tax.
Unless there is good evidence to support the acquisition, I`d be more concerned with MLR than the niceties of tax, M`Lud.
