Hello
If I have a small sole-trader business that I sell to a limited company that my wife sets up & owns for £10,000 - it's true market value (which I believe would avoid the connected party issue), could I therefore treat as follows:
Husband - Makes capital gain on disposal, covered by Annual expemption - hence tax free
Wife Ltd - Debit goodwill £10,000; credit other creditor £10,000.
Also, being that goodwill purchased from "unconnected party" (ie at market value), write down goodwill over say 10 yrs and NOT add-back amortisation in corp. tax comp.
Therefore, £10k out of company tax free, and relief on the £10k over 10 years.
Is it really as easy as this?
Replies (3)
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Depends
When did sole trade start? Regardless of what is paid for it, it is a transfer between related parties.
Is the goodwill transferrable?
Began 1 year ago
Hello the business began 1 year ago. The goodwill represents one year's worth of turnover generated from a client base which is expected to contract the service annually.
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yes, on the facts given you are correct.
remember that incorporation will bring many other issues and may or may not be the best long term solution.
It may sound like a great wheeze now, but remember you can only do this once and on figures of £10k the tax savings are nice but wont last that long!