AIA on transfer of business from sole trader to partnership

AIA on transfer of business

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Just checking that I can claim AIA when a business transfers from sole trader to partnership, can anyone  confirm that I am ok to claim please.

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RLI
By lionofludesch
09th Aug 2016 09:54

I can't. Businesses are connected. Assuming that the sole trader is one of the partners.

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By Di
09th Aug 2016 10:14

Sole trader is one of the partners, so business continues for sole trader, so it's not a final trading period so they should be able to claim the AIA? Any thoughts?

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Replying to Di:
RLI
By lionofludesch
09th Aug 2016 10:45

How about "data" before "thoughts"?

Who bought this asset ? The sole trader or the partnership? What were the transfer arrangements when the partnership was formed? When was the asset bought?

You ask a question and then find yourself challenging the answer saying "Ah, no, what I meant was ...." instead of just giving all the details - some obviously required - in the first place.

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By Ruddles
09th Aug 2016 10:21

Please clarify - are you talking about the sole trader claiming AIA on assets purchased by him/her in the final period prior to transfer to partnership?

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By Polly-Esther Kakz
09th Aug 2016 10:37

Surely there is no "final period" prior to transfer to partnership. There is a business, which is treated as continuing; previously there was one partner, and now there is more than one partner. AIA can be claimed for any period in which all of the partners are individuals.

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Replying to Polly-Esther Kakz:
By Ruddles
09th Aug 2016 10:47

Agreed - I was only checking that the OP wasn't thinking about the partnership claiming AIA on the 'new' assets with the sole trader already having claimed allowances. The question is unclear in that respect. We now have clarification.

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By Di
09th Aug 2016 10:44

Yes I am looking to claim the AIA on purchases during the period to 31 July by the sole trader before she went into parnership on 1 August. I will claim this v her self employment pages

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By Di
09th Aug 2016 11:25

Thank you for your replies. I propose to claim on behalf of the sole trader AIA on assets purchased in period before transfering into partnership on her self-employed pages. I just was concerned it would be taken as a cessation as the partnership pages will be completed for the next period. I will provide details in the white space for full disclosure.

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By Arbitrary
10th Aug 2016 12:27

My understanding is that:-

When a sole trader transfers the business to a partnership the partnership is a different person to the sole trader business, thus there is a cessation of the sole trader business. Assets acquired by the sole trader in the final period before transfer are not available for AIA, nor are writing down allowances available. Balancing allowances or charges remain relevant. Also an election may be made for tax written value to be transferred to the partnership by the sole trader (s266 CAA 2001). This whole process can get quite complicated and, if you do not understand it, you need to get 'specialist' advice; I am not a specialist. As regards the partnership, relevant assets acquired by the partnership for its trade qualify for AIA/WDA in the normal manner from commencement.
I hope this is of some help.

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By DMGbus
10th Aug 2016 12:41

No cessation, see BIM72260, deemed continuation...

BIM72260 - Partnerships - computation and assessment: partner’s deemed trade - commencement and cessation

Where a partner joins or leaves a continuing business their ‘deemed trade’ is treated as having commenced when they first joined the partnership and is treated as having ceased when they leave the partnership (ICTA88/S111 (4)(b) and (e)).

But, if the partnership business was previously carried on by one of the partners on their own, you treat the ‘deemed trade’ for that partner as having commenced at the time the business was in fact set up and commenced (or is deemed to commence by ICTA88/S113 (1)).

Similarly, if one of the partners succeeds to the business and thereafter carries it on on their own, you treat the deemed trade for that partner as having ceased when the business is permanently discontinued (or is deemed to be discontinued by ICTA88/S113 (1)).
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As there's no cessation period AIA is claimable.

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RLI
By lionofludesch
10th Aug 2016 12:41

Couple of points.

1. The OP is misleading as it refers to AIA "on transfer" whereas actually, it turns out it's for the period immediately before that.

2. The section 266 election may be made. Equally, it may not.

3. A lot depends on whether the new partner is happy to let the sole trader keep the benefit of the AIA on the purchase of that asset whilst (presumably) chipping it to its book value. The relationship between the partners will be particularly relevant here. A spouse may not be all that bothered. A completely unrelated party might expect some adjustment to the capital he contributes.

Again - a one sentence OP just not good enough to produce a response on you can rely.

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Replying to lionofludesch:
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By Ruth Lesley
10th Aug 2016 13:08

Your 2, and in consequence your 3, is complete garbage. There is no transfer; there is no succession; there cannot be a section 266 election. The same trade is continuing throughout and is taxed as DMGBus describes. All that matters is when the exoenditure is incurred, and what the periods of account are. AIA can be claimed for any period where all of the partners are individuals.

What might affect things is what happens with the accounting dates around the change, about which we are told nothing.

The real issue in the thread though is people confusing the issue by talking so fluently in complete b*llocks.

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By Di
10th Aug 2016 13:42

Thank you all for your comments BIM72260 is quite clear that it is continuing for the sole trader so AIA is available. Shame the new HMRC website has archived the BIM72260 content I wonder why?

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Replying to Di:
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By Ruth Lesley
10th Aug 2016 13:49

It hasn't. BIM72260 is just now BIM82260, as a result of the inclusion in BIM of material in relation to casg accounting and simplified expenses.

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By andrew1211
17th Aug 2016 09:58

Claim on what? You cannot claim AIA on assets transferred across. Obviously any new purchases you can.

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Replying to andrew1211:
RLI
By lionofludesch
17th Aug 2016 11:54

It's new purchases the OP is concerned with.

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