Assets on incorporation

Assets on incorporation

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Hi

Very quick question (potentially silly question) regarding requirements on transferring assets on incorporation.

I'm fairly comfortable on the numbers side of things (i.e transfer at market value or alternatively TWDV to avoid balancing charge/allowance adjustments)

My question is do the assets have to be transferred to the company in any sort of "legal" sense?, for example vehicle purchased by sole trader a year before incorporation via hp, the asset and corresponding hp liability were taken out in the sole traders name, when the asset/liability are introduced to the company would the finance company need to be contacted and the title deeds transferred to the company? Also any other assets bought outright for cash by the sole trader pre incorporation, would any procedure be necessary for the ownership of these???

Any comments/answers greatly appreciated

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By dropoutguy
23rd Feb 2015 20:07

Yes and no

You will need to advise the finance company so that the agreement can be novated or assigned to the company.

As regards assets bought and owned outright, it is not necessary to have a business purchase agreement, but it could be advisable if the shareholders in the company are not the same as the owners of the business prior to incorporation.

Also, consider stamp duty land tax and capital gains tax.  If there is value placed on goodwill, what do you want to do if HMRC are subsequently able to argue that it is worth more/less than the value transferred.  Some people put an adjustor clause in a purchase agreement so that the transfer consideration is adjusted to the tax agreed value.

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By johngroganjga
23rd Feb 2015 20:08

Yes ownership of the assets needs to change. But in most cases that can be achieved by mere delivery. For property (which you don't seem to have) that could only be done by a formal legal document. For a car subject to HP you will need the lender's consent first of all.

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By rjeffrey89
23rd Feb 2015 20:26

Sorry-no property, very small business, small amount of plant and 1 vehicle on HP, thanks very much, two great answers

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