Can profits in sole trader business be taken as drawings prior to incorporation ? Presumably this profit forms part of SA return for that period of the trading year (and corporation tax will apply to profits in the period thereafter. If all current cash reserves ( Current, tax provision and Reserve) are transferred is it possible taht they will be subject to 2 different taxes ? What is the appropriate way to handle this ?
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Capital account
is the figure to identify first.
This is the amount of value in the business which has been included in the SA, and taxed on an arising basis. This is the amount that can be withdrawn with no further tax charges. If it is transferred to the company it is a loan to the company by the Director.
Quite simple, really
You shouldn't equate taxable profits with cash. Whether you transfer £1 or £1m to the company, the sole trade will be taxed on irs profits and the company on its profits.