CGT on sale of business

CGT on sale of business

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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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By Steve Kesby
09th Jul 2014 23:06

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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By daviddaniels
16th Jul 2014 09:49

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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?

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Replying to stepurhan:
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By User deleted
17th Jul 2014 16:50

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daviddaniels wrote:

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

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By daviddaniels
17th Jul 2014 09:31

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Any advice on where to read up on this?

 

Thanks

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By johngroganjga
17th Jul 2014 10:48

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.

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By daviddaniels
17th Jul 2014 12:11

Am I worrying too much?

That's what I was thinking, but it just seems a very large amount of goodwill. I've never been asked to advise on this before, and I don't know if I'm worrying about it too much.

 

The way I see it is, allocate an amount to cover the stock and fixed assets, (checking that there is nothing else included in the sale), the remainder of the selling price being goodwill. The business is a partnership so husband & wife's personal allowances and annual exemptions are being used. The gain relating to the goodwill attracts entrepreneurs relief.

 

 

 

 

 

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By johngroganjga
17th Jul 2014 12:16

Yes that 's right.

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By Justin Bryant
17th Jul 2014 15:09

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.

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