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advance clearance and excess receipts

advance clearance and excess receipts

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I have a client company which has sold its trade for £600k to be paid in stage payments over the next 2 years, the client is looking to wind up the company and for the funds to be paid elswhere, what is the teatment of any amount received in excess of the agreed valauation with the HMRC.

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By johngroganjga
06th Jul 2020 15:55

Why does he want to do something so strange, and where is the “elsewhere” he wants the future stage payments to go to?

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Replying to johngroganjga:
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By CW2012
06th Jul 2020 16:16

The shareholder / directors have to close the company as it is a regulated business and they would have to carry on paying the insurance etc. The funds are being remitted to the holding company post the subsidiary being liquidated.

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Psycho
By Wilson Philips
06th Jul 2020 16:05

If the business was sold to an unconnected party (I am assuming that to be the case) why do HMRC need to agree the valuation?

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Replying to Wilson Philips:
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By CW2012
06th Jul 2020 16:17

Its the value of the future receipts, they are contingent on certain factors Covid 19 makes the outcome even less ceratin.

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Replying to CW2012:
Psycho
By Wilson Philips
06th Jul 2020 16:32

Contingent ascertainable or contingent unascertainable?

As happens too often, way too little information given.

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Replying to Wilson Philips:
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By CW2012
06th Jul 2020 16:49

I did try to keep it brief and to the point, however the issue is what becomes of any amount received above or indeed below the agreed valuation with the HMRC once the selling company is liquidated.

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Replying to CW2012:
Psycho
By Wilson Philips
06th Jul 2020 17:05

Keeping it brief is of no use in a case like this. If you don’t want to expand, fair enough - just don’t expect to receive a sensible answer.

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Replying to Wilson Philips:
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By Tax Dragon
06th Jul 2020 17:20

Wilson Philips wrote:

Keeping it brief is of no use in a case like this. If you don’t want to expand, fair enough - just don’t expect to receive a sensible answer.

TBH, the OP has said so little that at this point I still don't understand the question.

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Replying to Wilson Philips:
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By CW2012
06th Jul 2020 17:25

I take your point, I'm happy with the rest of the planning its just what happens should the future receipts be more or less than the agreed amounts (and lets face it they will be). The selling company will have been wound up by then.

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Replying to CW2012:
By SteveHa
06th Jul 2020 17:10

You still haven't addressed Wilson's question - why has a valuation been agreed with HMRC? This would typically only be an issue for SDLT.

If the valuation is a reasonable market value, then if HMRC seek to challenge it's up to them to prove it isn't reasonable. It isn't up to you to have them agree in advance (and I'm pretty sure any such agreement would be null and void if it ever ended up in a tribunal, anyway).

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Replying to SteveHa:
Psycho
By Wilson Philips
06th Jul 2020 17:32

The position is potentially more complicated than that, and than the OP seems to appreciate. I think some reasonable assumptions can be inferred from the limited information given but if the OP can’t be bothered to provide the additional information to confirm I can’t be bothered to attempt a response.

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Replying to SteveHa:
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By CW2012
06th Jul 2020 17:33

Am I on the wrong path here, company A sales its sales ledger to any old Joe Ltd, the funds are paid in 3 instalments, last December, next December and the December after £200k a piece, these amounts are contingent on the business continuing to attract the same or a better level of turnover, Company A has a capital gain on its disposal made last December, the gain is being valued and this value is being sent to the HMRC for approval in the CT600 December 2019. Company A will be wound up once the accounts are filed and the future remittances will be paid to the parent company (or what was). How do you treat the differences in amounts estimated and approved by the HMRC and the actual receipts.

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Replying to CW2012:
Psycho
By Wilson Philips
06th Jul 2020 18:08

What gives the patent company the right to receive the income? That is only one piece of several missing items of information. We can’t advise if you’re on the right path or not if you won’t provide the details requested.

I’m out of here. Someone else can have a go.

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Replying to Wilson Philips:
By SteveHa
06th Jul 2020 18:52

I'll go with one misunderstanding. Submission of a gain on a CT600 is not HMRC giving approval of the valuations used. It is a self-assessment which HMRC are free to challenge at a later date according to the taxes acts.

But, Wilson raises further valid questions based on your answers and the limited information available.

Where on earth does the parent company fit in to this transaction?

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By Bobbo
06th Jul 2020 18:24

Might have been worth you providing a link to your previous question (as I presume it is the same client, if not a mighty coincidence) which would have potentially saved you the time re-explaining the situation.

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Replying to Bobbo:
Psycho
By Wilson Philips
06th Jul 2020 18:38

Indeed - and I see that I contributed to that other discussion!

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By Matrix
06th Jul 2020 19:01

It looks as if this has all happened in the past so I would ask the client for the tax advice received from the solicitor. If they wanted your input on the tax implications they should have involved you at the outset.

They should keep the company open in case any adjustment is necessary to the gain/tax.

How would HMRC be able to value this transaction in any case if future cash flows are uncertain and why do you think the submission of a CT600 means the value has been approved? The figures are self assessed.

Send the client back to the law firm anyway.

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