Change from Partnership to Sole Trader - Accounts & Tax Implications
Client changed from Partnership to Sole Trader mid-way through accounts year and all the legal paperwork was done correctly. However...even though the previous accountants were informed of this via the legal documents drawn up by a well known firm of solicitors there is no entry in the accounts with respect to the 'gifting' of Partner B's current account balance to Partner A (this was a father/son partnership). Accounts year runs January 1st 2004 to December 31st 2004. Partnership changed to Sole Trade 1st May 2004 i.e. Partner B left. Partner B's current account shows opening balance as at 1/1/04 at £19,995 and closing balance as at 31/12/04 at £19,995 - surely this is wrong? Should there be some additional notes in the accounts?
In addition, on the Partnership Tax return for year ended 5th April 2005 in box 3.8 (page 2) a date of cessation has been entered as 31/12/04. Should this have been 30/5/04?
As the £19,995 has been 'gifted' to Partner A is there only a possible inheritance tax obigation or is there any other tax that should have been accounted for?
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