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?
- TAX, VAT and non-UK residence 497 19
- Charity accounting 258 6
- Outsourcing Payroll 72 1
- sage 97 3
- Separate Pay runs for salary and commission 151 4
- Bank Requesting clients' tax residence 1,048 13
- ATT Exam tips and study help 202 4
- NO SUCH THING AS UNQUALIED ACCOUNTANT 117 1
- FBI2 198 3
- Double entry 164 4
- Companies House 136 3
- Small house in garden 142 1
- THE PUBLIC SECTOR SUCKS 137 2
- Clients 917 18
- can a dormant company make an employer pension contribution? 285 12
- Manually amending PAYE Code Number in HMRC Basic PAYE Tools 144 5
- Accountants not providing all required information 270 4
- Director's personal expenses paid by the Company 310 5
- Sage 50 - How do I find the column headings when I export to CSV 128 5
- Is a property owner charging a peppercorn rent to a limited company acceptable 517 11
- HMRC BENCHMARK EXPENSES 537
- write off loan or loan to equity swap or both 468
- EPS and CIS deductions 327
- Sole trade business in UK, but the owner works from EU 310
- Construction CIS LLP Company 300
- Stamp duty on house transfer between spouses 295
- Tax Investigation - Employee Travel 262
- Overdrawn director account 217
- LIVE: Budget aftermath webinar 204
- Services via intermediaries and new HMRC reporting requirements 199