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)
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A friend? Really??
Not you then?
https://www.accountingweb.co.uk/any-answers/aia-on-new-commercial-property
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.
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.
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