VAT on sale of Assets to Director

VAT on sale of Assets to Director

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If anyone can give some advice I would be grateful.

I have a client who was a sole trader 4 years ago. They bought equipment  for the business as a non vat registered sole trader. 1 year later they were advised to be LTD and go to VAT Registered.

The assets were subsequently transferred to the LTD and double entried via Directors Loan obviously.

Now the client wants to come away from the LTD and has run the business as a sole trader not vat registered for the pass year (new bank account etc)

I now need to transfer the assets back from he Ltd to the sole trader (via directors loan again)

My question is,the LTD is still vat registered, do I charge vat on the sale/transfer of the assets to the director to be used in the sole trader business ?

The Ltd company and the Sole trader are being run as a similar business.   

Replies (3)

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Portia profile image
By Portia Nina Levin
23rd Sep 2014 11:21

TOGC?

If the soletrader incurred, but (because they were not VAT-registered) was unable to recover, input VAT, and the transfer of the business to the company satisfied the TOGC criteria, then any supply of those goods now is an exempt supply (VATA 1994, Schedule 9, Group 14).

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By rachypachy167
23rd Sep 2014 11:36

Thank you for the reply.

I am right that the sale/transfer of the assets would be subject to corporation tax though  ?

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Portia profile image
By Portia Nina Levin
23rd Sep 2014 11:43

Yes

The sale proceeds (limited to original cost) should be deducted from your pool and would give rise to a balancing allowance/charge. To the extent that they are sold at undervalue, there is a benefit in kind for the individual.

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