Asset transfer on incorporation and CA

Asset transfer on incorporation in the firstyear of trading

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A client, mixed LLP (1 individual & 1 corporate member), was incorporated last year. A month ago, the individual left the partnership and the corporate member decided to convert LLP to a Ltd. All assets and liabilities have been transferred to the Ltd at MV (NBV is very similar to MV for fixed assets). But I just can’t get my head around on how to deal with Computer Equipment (cost of £4K and NBV=MV of £3K). As this was their first and last year of trading CA are not available. Does this mean that TWDV is £0 or £4K? Thank you

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By taxdigital
20th Apr 2024 10:55

On incorporation of the business, you could transfer the plant and machinery either for consideration or for no consideration. If transferred for consideration, the disposal value will be the lower of actual consideration received and the original cost (s.61 + s.62 CAA). If transferred for no consideration, then the disposal value will be lower of market value and the original cost. (s265). In this case you transferred it for a consideration, which means the market value at £3k, being the lower sum, should be the disposal value. Depending on the client's income tax and CT position you have the following options:

a) Take £3k as the consideration.
b) Transfer it for £1 consideration, it still do-able, or
c) Make an election (s.266 +s.267)

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