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?
- Advertising with Hibu nee Yell (Yellow Pages) 182 3
- Auto-enrolment - Fees 274 4
- Self assesment losses 273 8
- RTI and s18 ITEPA 150 3
- Off site storage 71 1
- Increasing the personal allowance: A top priority? 1,068 42
- Garden studio - tax and VAT deductible? 109 1
- CT treatment of staff entertainment for overseas staff 92 2
- Is Accountancy Becoming like an Insurance Policy 523 4
- Joint Property rent 152 3
- Anyone know about Cloud-Based Practice Management Software? 198 6
- Now the phishers have baited their hooks with SAGE 240 1
- Fee protection 870 16
- Overdrawn DLA 262 9
- Disposal of an opted property 134 2
- Sage Bank Reconciliation 240 5
- Irish Taxation 97 1
- If I repay my Directors loan, will I haveto pay tax on the profit ? 3,136 31
- CIS monthly declaration 200 9
- Telephone call from "Xero" 378 4
- Xtuple 560
- Qtac payroll for bureau 382
- Confused - Professional Association a Mutual trader, or not? 335
- Industrial & Provident Societies 324
- Domain name sale and limited company 224
- Italian friend wants to set up a UK company to reduce taxes 206
- Director legal fees in loose connection to the company 204
- Investment 202
- Tax on damages received 173
- Multiple bodies and practicing certificates 160