Author incorporation has already been discussed in this thread - https://www.accountingweb.co.uk/any-answers/author-becoming-ltd-incorpor...
My understanding is that the market value of the copyright that is transferred on incorporation (or right to expolit the copyright) needs to be treated as trading income for the sole trader when they transfer it into the company.
My question is how on earth is that valued?
Scenario 1 - author has received £20k of £60k total advances and they have written 3 of 10 chapters at the point they incorporate
I can think of a few possible ways it could be valued (perhaps none are correct!)
- the copyright of a partially complete book is worth nothing
- the value is 3/10 of the £20k advance already received
- the value is 3/10 of £60k (total value of advances)
Scenario 2 - book is complete, all advances received, royalties trickling in, then copyright transferred.
I would guess the value would be expected future income with some discount applied... but unsure on this too
Has anyone got any first hand experience of this which they could share? What do HMRC agree as reasonable valuation methods in these scenarios?
Many thanks in advance