Acquisition cost

Treatment of deferred cost

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Hi All, I was wondering if the buyer has any tax relief available to them if they agree to purchase a business from another soletrader by only paying 10% upfront of the agreed price along with making fixed quarterly payments of the remainder amount over the next 3 years to the seller.

Thanks in advance

Replies (10)

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By Tax Dragon
24th Mar 2024 09:14

I take it your concern is that, whereas s28 is plainly symmetrical (it applies equally to buyer and seller), the same cannot be said of s48. You think that means it could be possible to end up with a base cost, not only below the amount payable under the contract, but less than the amount paid?

I would take comfort from s38, which simply refers to the amount given in money.

Alternatively, you think the purchase price can be expensed, in which case - no, of course not, and I recommend you hire an accountant.

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Replying to Tax Dragon:
RLI
By lionofludesch
24th Mar 2024 10:27

Jeez - my first thought was "what does he mean by 'business'?"

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Replying to lionofludesch:
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By Tax Dragon
24th Mar 2024 11:30

I figure it doesn't take 3 yrs to pay for a (second hand) ladder, bucket and sponge. So I've ruled out some possibilities.

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Replying to Tax Dragon:
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By FactChecker
24th Mar 2024 12:41

Depends on the source of initial funds ... there will be someone out there who is currently paying the loan shark 95% of the turnover from their window-cleaning 'business' (and that'll be just trying to keep the interest from increasing further)!

EDIT: Synchronicity lives!
Although I've never been a window-cleaner, I've just had to go outside in my dressing-gown (brrr) to offer the police a lend of my ladder [they were trying to get over a high garden wall two doors down, to chase intruders, and obviously aren't as fit as I recall from my youth].

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By Ruddles
24th Mar 2024 12:34

My question would be - “relief from what?”

The OP doesn’t make much sense to me.

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Replying to Ruddles:
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By Paul Crowley
24th Mar 2024 17:28

Agree
No idea what the question is asking.

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By Paul Crowley
24th Mar 2024 17:30

Best get an accountant before you commit, then you could ask him what you really need to know.

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By S Mehmood
24th Mar 2024 23:22

Clearly I have not articulated my query very well. The query is around obtaining client listing and if there are reliefs available for the amount paid to the vendor.

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Replying to S Mehmood:
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By Paul Crowley
24th Mar 2024 23:36

Probably not.
your accountant is the best person to ask this of.

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Replying to S Mehmood:
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By Tax Dragon
25th Mar 2024 05:49

If it helps, that was my assumption when posting the first reply.

What you're buying is a capital asset subject to CGT not income tax. While the cash basis has blurred the capital/revenue distinction for sole traders, certain assets are basically excluded from that - and this is one of those assets.

In my first post I suggested you sign up an accountant. I suggest that again. Your questions are best addressed by someone with the facts, rather than someone who, as I did, is making assumptions.

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