Puchase of Dental Practice

Posted by Anonymous PM | on Wed, 10/03/2010 - 12:18 396 6 comments | report

Can anyone offer advice? I am preparing the accounts for a dentist who has just bought a incorporated practice. Sellers acccounts had Goodwill matched with Directors loan account - sale consideration details that the loan account was paid off by Client (new dentist) direct to practice and then shares transferred at nominal value. Will the loan account now just transfer to new client or wondering if this could be share premium instead?

Thanks.

Comments

No issue of shares

Anonymous | Wed, 10/03/2010 - 13:07 | Permalink

There is no issue of shares so you cannot create a share premium account. The loan has simply transferred to the new owner.

can't be share premium

geoffwolf | Wed, 10/03/2010 - 13:08 | Permalink

because that can only arise on issue of new shares. In effect the new dentist has made a loan to the Company which has repaid the old dentist;s loan.

The question you need to consider is whether the goodwill in the Ltd company was personal to the old dentist to any extent which could have an affect on the justification for repaying the old loan in full without it being considered to be a distribution.

Purchase of Dentists

Anonymous | Wed, 10/03/2010 - 13:31 | Permalink

Thanks Geoff - Goodwill remains with the incorporated practice - sale was 12 mths ago and customer base of practice continues unaffected by change of owner. Original setup of Directors loan under 2006 HMRC rules for Dentists incorporating allowed for loan to set up on incorporation to offset goodwill and triggered CGT charge then allowing a call-off for original dentist on loan account with no income tax implications - therefore it would not be a distribution. Looks like the payoff of the original loan (part of sale consideration) now creates a new loan.

Thanks for the advice.

Muddied waters!

Anonymous | Wed, 10/03/2010 - 15:08 | Permalink

How interesting, who advised the buyer to do this and I wonder what the seller thinks his tax position is after the deal?

Muddied Waters ?

aine.phillips | Wed, 10/03/2010 - 17:55 | Permalink

All actions before my time - what would you have advised?

thanks!

Muddy waters

Nichola Ross Martin | Wed, 10/03/2010 - 20:57 | Permalink

The obvious alternative would have been to have purchased the assets of the business, and then let the company and director sort themselves out.

Always easy to be wise after the event, and really difficult for anyone to answer this without having been party to the negotiations, seen valuations or conducted due diligence on the company.

Virtual tax know how and online practice support: www.rossmartin.co.uk