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I have a new client who bought a business from a retiring sole trader for £15K no goodwill as such, a bit of a client list, equipment and some stock.

The cost of the business especially the equipment was below market value.

The client incorporated after the purchase of the business and introduced the equipment and stock. He put a market value on the equipment of £20K.

My question is would HMRC query the difference, if the equipment was recorded at its market value instead of its actual cost?

Thanks

Mark

Replies (5)

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By johngroganjga
15th May 2013 09:54

How was it that the client was able to achieve a purchase at below market value?  Was the vendor a family member?

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By oneillmark
15th May 2013 12:56

Gentleman was retiring and no one had shown any interest for quite sometime (over a year), client made a cheeky offer which was accepted.

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By thomas
15th May 2013 13:32

Surely if the market value wasn't achievable then its not really market value?

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By johngroganjga
15th May 2013 13:41

As transaction was at arm's length between unconnected individuals market value at the date of the original purchase must have been the amount paid.

How long was the interval between the acquisition of the business by your client and the transfer of the business into your client's limited company?  Did your client trade on his own account during that period?

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By oneillmark
21st May 2013 19:26

Sorry for the late reply.

Client transferred business into limited company within a few weeks and did not trade on his own in the intervening period.

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