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?
- Accountancy practices - are you closed over Christmas or do you let your staff take it off? 943 29
- You know its over 321 4
- HMRC BACK AND FORTH FIGHT ON BTL PROPERTY ALLOWANCES 482 9
- How do you find shareholders of a Cyprus Company ? 209 13
- Valuing my fast-growing internet business for transfer of goodwill on incorporation 163 2
- HMRC won't let me set up online DD for PAYE 151 2
- What is the amount of dividends received as a shareholder that requires registration for self assessment? 227 3
- Cocaine anyone? 500 8
- Late Registration for VAT 480 13
- EIS/SEIS 135 1
- Amortisation of Goodwill 269 1
- TaxCalc Accounts production 409 5
- Depression - HMRC penalties case won because of this illness. 417 12
- Solicitors now, Accountants next 708 10
- How come if you claim benefits you are not entitled to you either have to pay a 50% penalty or are sent to court and either fined or sent to prison (sometimes suspended) and end up with a criminal record. 550 10
- ACCA - still making me laugh 583 4
- Personal pension 398 9
- Legal Aid Agency claims and VAT 220 1
- How much of your work is admin? 1,213 11
- Petrol expenses for self-employed 167 3
- Hive up 489
- Accounting referance change & deficient accounts. 453
- corporate hierarchy 433
- Advice - 270
- Anyone had HMRC refusing to act on EPS database glitch? 223
- WWOOFers 216
- Co. limited by Guarantee now closed 205
- Art Gallery - Splitting a property between business and personal use 193
- Tax liabilities in USA for warehoused products 175
- Mutual Trading - Exempt CT Income - Do I need clearance? 172