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Sole trader to Limited
Posted by hartqc on Thu, 02/07/2009 - 09:14
I have a client who is currently a sole trader, turn over circa £750k profit per year around £150k, a building firm, he has 10 staff, how does the process work for switching to Ltd and also the goodwill transfer etc, is there Entrepreneurs relief up to £1m, so 10% tax paid on the transfer? Please give me a rough overview about how this works, im a financial planner and not an accountant, he has an accountant but they seem very unproductive, also if it is switched to Ltd how much can the yearly pension contributions be as an employers contributions for the new director/owned.
all the help is appreciated,
thanks
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He really needs to take advice, giving you an idea on here could prove more dangerous to this client than not giving any ideas. Sorry, I know this is probably not what you want to hear.
Also, you are a financial planner, I assume this is the same as a Financial Adviser? In which case you really should know the answer to the pension contribution question?
Jason
Holden Associates
A Blog for Small Business
If the existing accountant can't cut it then change to one who can.
Capital gains tax will not be payable at all if this is structured properly. This is basic "learn at your mother's knee" stuff for those of us in practice.
It is distressing that the existing advisers have not told you this much (assuming that you have asked them of course).
Dear Anonymous poster
I'd suggest you change your accountant. Get a good one - by this I do not mean "qualified" necessarily, but one you feel comfortable with....
Cheers
I agree with the previous posters
This needs proper advice from somebody that knows what they are doing. It's great that you have identified an opportunity, but without knowing too much about the client I can also think of at least 3 problems that may also need to be looked at before taking any action:-
VAT regsitration transfer
CIS re-registration if the builder is a contractor/subcontractor
Transfer of employee rights to the new company
It's also very difficult to advise a trader to incorporate at the present time when profit levels are unsteady. As a sole trader it should be possible to make good use of tax losses. If you incorporate and then start making losses they cannot be relieved until such time as the company starts to make profits.
If the current accountants are genuinely being unresponsive suggest to your client that he seeks a second opinion. However, they may not be responsive to the idea because it is actually not a good idea for that client!
Paula Sparrow