Balancing allowance on plant pool upon incorporation

Balancing allowance on plant pool upon...

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When incorporating a sole trader business, can the company purchase the plant pool for £1 therefore creating a balancing allowance in the sole trader business or does market value need to be substituted?

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By raychidell
24th Oct 2012 15:36

Allowances on incorporation

As long as the company does indeed buy the asset for £1, the sole trader can obtain a balancing allowance (CAA 2001, s. 61(2), item 1 in the table).

Some forms of incorporation require the sole trader to gift the assets (so as to obtain the desired CGT outcome). In this case, the parties may elect to transfer at tax written down value (see s. 266 and 267), giving no balancing adjustment for the vendor. If the asset is given, but no election is signed, market value will need to be used (item 7 in the table).

Ray

www.claritaxbooks.com

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