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?
- Paint Manufacturer Flat Rate Scheme 279 13
- VAT on motor expenses 885 32
- Cleaners wages at small church -PAYE or self employed ? 61 1
- Sage Payroll with 'employees' not having tax or NI deducted 51 1
- Why do HMRC have a different FPS liability to the amount I sent? 1,702 22
- Limited Company - Personal Bank Account 2,293 40
- How to account fot Cross-border vat. 82 1
- Entrepreneurs' relief for trustees - receipt of rent 132 3
- Associated companies - CT small profits relief 155 7
- Introduction of Goodwill 184 5
- PayPal Transaction Analysis 152 4
- Incorporation - any tax advantage? 737 19
- Company overdue but wants to be struck off 383 12
- Money transfers between companies owned by one person 202 9
- A change from the old Q v NQ debate 325 11
- Sage 50 (2010) 106 2
- ideas for a bonus scheme for accountants 388 3
- Recommendation of US tax adviser? 91 1
- Notes to statutory accounts 323 15
- Two clients (married to each other) disappeared from client list 405 9
- Skandia using wrong address 1,545
- Nil Rate Band Trust - index linked debt by way of charge over property 850
- International interest certificate 467
- NOVA 326
- Subby expenses subject to tax & NI? 228
- Can Limited Company Buy Share of Rental Property? 216
- Bonus Bonds 207
- Management expenses for investment company 204
- DOUBLE TAXATION RELIEF BETWEEN A PRIVATE LTD COMPANY AND GREECE (the private Ltd has no employees and its main activity is 196
- Have we escaped Gift with Reservation of Benfit & Pre-owned asset charges? - Gift after benefit 183