Selling a business after incorporation
The benefits of incorporating a sole trader or partnership business are well known; eg goodwill, amortisation, entrepreneurs relief, loan accounts, etc. However, what happens if the business is then sold to a third party a couple of years down the line for a price similar to the value agreed with HMRC on incorporation?
If the owners sell the shares then obviously the base cost would be the value at which they were subscribed (usually £1 each) and they would claim ER on the whole proceeds effectively. But if the third party purchased the underlying business from the company rather than the shares, obviously the company would have a chargeable gain.
Could the company claim the value agreed with HMRC on incorporation as its base cost and only pay tax on the increase in value since then, or would it have to pay tax on the disposal proceeds?
Common sense says that the base value must be the amount "paid" by the company otherwise most of the gain would be taxed twice, once on the original owners and then on the company. But what happens if the company has claimed amortisation of the goodwill element againmst its trading profits? It seems to me that the goodwill would then be claimed twice, first against trading profits and then against the sale proceeds.
Am I right in thinking that you can only claim the unamortised goodwill in the chargeable gain calculation or is it more complicated than that?
- Accountex flash mob 530 18
- The new married allowance 122 3
- Thoughts on revenue recognition 148 2
- Any good members voluntary liquidators 44 2
- Tax refunds for 2014/15 676 10
- Career advice for ex HMRC Inspector 851 20
- Getting fees, getting harder? 1,722 32
- VAT by Direct Debit 111 8
- Er... 332 2
- Cash extraction pre-sale 204 5
- VAT claim on exempt supply 310 11
- Group structure - transfer of shares 127 5
- Child benefit 351 9
- £3750 earned in Dubai - where on the income tax return??? 147 3
- Tax on selling a sole trader business 317 10
- IR 35 227 5
- Share disposal - help please 112 1
- New desktop accounting and payroll, help, please 348 11
- Final accounts - procedure 353 6
- NIC question 127 1
- Services via intermediaries and new HMRC reporting requirements 657
- LIVE: Budget aftermath webinar 410
- Pensions Regulator 380
- RTI - duplicate employee record 343
- NIC contribution on unremitted income 328
- SA penalty proposals 311
- Using the correct forms 303
- How hard is it to reduce a code? 297
- Sage Vat return box 2 207
- Digital marketing focus group 202