A client is selling his business, and his solicitor has told him to ask me how I want things arranged for tax purposes. The business is a partnership (husband & wife), so both annual allowances will be available, and they are retiring so rollover relief isn't an option. So as long as they meet the criteria for entrepreneur's relief is there anything else I should be considering?
The business is a trading business and the assets on the balance sheet are written down to practically nothing.
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The transfers...
... of any stock and fixed assets won't attract ER, they will give rise to taxable profits/tax deductible allowances. If there's any real property being transferred consideration may need to be given to the fixtures position, The solicitor probably wants to know how much should be allocated to the different elephants.
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There is no property and the stock and NBV of the assets on the balance sheet are only 5% of the selling price. Is it usual practice to use the balance sheet figures, or should items like fixed assets be revalued?
Fixed assets will be sold at market value - with the lower of cost and proceeds being processed through the Capital Allowances.
Stock will be sold at arms length realising taxable profits, as you would in the normal course of trade.
Presumably the Bank balance isnt being transferred...
The balancing figure is then goodwill - this is the gain that will attract Entrepreneurs relief
So if stock and fixed assets are 5% of the selling price the rest is goodwill presumably? If so just run through the tax consequences of selling the stock, fixed assets and goodwill at those values and take it from there.
Not sure why
Fixed assets wouldn't qualify for ER, as these are (presumably) capital items used in the business. (I guess elephants are wasting assets, so are not included, but it’s a bit of a grey area!) Elections re stock can be made if selling to a connected party to disapply MV.