Balancing charge on sale of building

Balancing charge on sale of building

Didn't find your answer?

A friend has sold their business 

Part of the balance sheet included a building purchased in 1950 for £10,000

No capital allowances were ever claimed on the purchase 

The building was sold for £120,000, are the sales proceeds added back on the tax computation ?

Trading profits including the profit on sale on disposal was £100,000

So what happens to the sales proceeds of £120,000

Any help greatly appreciated

Replies (7)

Please login or register to join the discussion.

avatar
By terrytowlin
02nd May 2019 19:01

Wow thanks for that helpful reply

I previously worked as a bookkeeper so family members ask me questions I thought I might get a sensible answer on here obviously not !

Thanks (1)
Psycho
By Wilson Philips
02nd May 2019 19:32

You add back the profit on disposal, not proceeds, in computing tax adjusted trade profits.

You then separately calculate the chargeable gain - the calculations depending on whether the seller is incorporated or not.

Thanks (0)
Replying to Wilson Philips:
avatar
By terrytowlin
02nd May 2019 20:15

Wilson Philips wrote:

You add back the profit on disposal, not proceeds, in computing tax adjusted trade profits.

You then separately calculate the chargeable gain - the calculations depending on whether the seller is incorporated or not.

Thanks

Yes they are a limited company

So the chargeable gain is

Cost £10000
Less what they sold the property for £120,000?

Is this taxed at 19% Corporation Tax

Thanks (0)
Replying to terrytowlin:
paddle steamer
By DJKL
02nd May 2019 20:32

Remember March 1982 valuation and if a company owned asset indexation up to December 2017.

The indexation will likely be 2.501 times the March 1982 value so I strongly advise getting an accountant and then with his input getting a March 1982 valuation.

As an aside that is a terrible rate of growth for a property, a work colleague's father died a couple of years ago and a property his father had bought late 1950s for £2,500 sold for well over £400,000, the house I grew up in was bought by my parents in 1967 for £6,600 and was last on the market at £850,000.

Appreciate likely commercial but it looks really off, we have commercial properties on our books originally purchased in the 1960s and they are today more like a 70/80 fold increase.

Thanks (0)
Replying to terrytowlin:
Psycho
By Wilson Philips
02nd May 2019 20:28

It’s not nearly as straightforward as that. You need to consider, for example:

Value at 6 April 1965
Value at 31 March 1982
Whether or not a rebasing election has been made
Indexation

Thanks (0)
Replying to Wilson Philips:
avatar
By terrytowlin
02nd May 2019 20:35

Wilson Philips wrote:

It’s not nearly as straightforward as that. You need to consider, for example:

Value at 6 April 1965
Value at 31 March 1982
Whether or not a rebasing election has been made
Indexation

Thanks for your help

Thanks (0)