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Chargeable gain

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i have a client (limited company) that has sold some property (premises) in the year. In order to calculate the capital gain I need to identify the purchase price, however, the property was given to my client in,lieu of a debt. Therefore what value do I use as the purchase price, I'm assuming market value at the date of acquisition? Not the value shown on the balance sheet. Client had premises valued not long after acquiring and value was lower than amount shown as asset on balance sheet. 

 

Am am I right in thinking I need to use indexation too when calculating the gain?

Also so can someone help with regard to potentially claiming entrepreneur relief? 

Where does the chargeable gain get shown on the tax return? 

I guess the profit on sale from writing the asset out of the books is ignored when calculating the company tax due as usual.

 

many thanks

 

 

Replies (11)

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By Ruddles
26th Feb 2017 19:13

Why do you think Entrepreneurs' Relief is relevant?

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By Plantation
26th Feb 2017 19:37

I'm not sure it is relevant at all

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By Ruddles
26th Feb 2017 19:41

So why did you ask?

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By Plantation
26th Feb 2017 19:54

For clarification

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Hallerud at Easter
By DJKL
26th Feb 2017 19:37

If in lieu of a debt, what was the value of the debt?

What debits/credits took place within the books re the debt/asset acquisition?

Was the party conveying the property, presumably to your client's company, connected to your client or his company?

What legal paperwork do you/ does your client have?

Have you confirmed company has title to the property, I would not trust its inclusion in the accounts of the company as proof that was the case?

Did this happen before/after March 1982?

Yes, indexation likely applies if owned by company.

Do you have costs like stamp duty/legal fees etc?

What, if any enhancement of asset post acquisition?

ER is very off point if owned by a limited company.

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By Plantation
26th Feb 2017 19:47

Not sure what entries took place in the accounts for the debt to be written off and the asset to then be shown on the company balance sheet.

To date I have seen the completion statement regarding the sale of the property so I have the proceeds and professional fees to include from that.

As I was not involved when the debt was written off I am right I thinking I go ahead with the proceeds less costs / enhancements use indexation and then my problem then arises on the our has price of the property. If I ascertain this the gain will be taxed at 28% on the basis that ER is not applicable to limited companies, do that sound like a fair judgement?

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By Tim Vane
26th Feb 2017 20:13

Goodness gracious.

With respect, you clearly need to pass this client on to somebody who is competent to deal with it. Your initial query and subsequent follow ups show a worrying lack of basic knowledge and any mistakes will be very costly to your client and potentially yourself.

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By Plantation
26th Feb 2017 20:34

Other than my mistake regarding the point
mentioning entrepreneurs relief and my typo re the tax rate of 28% that should have read 20% I am only asking for clarification.

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By Ruddles
26th Feb 2017 20:48

Given what has gone on before, are you happy that you weren't correct first time round with the 28%?

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By Plantation
26th Feb 2017 21:02

Ruddles wrote:

Given what has gone on before, are you happy that you weren't correct first time round with the 28%?


Don't understand what you mean
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By Ruddles
26th Feb 2017 21:23

28% can apply to certain gains of a company. Did you not know that?

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