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Gifting a van to an employee

Gifting a van to an employee to start his own business

My client, a sole trader who cleans windows of commercial properties, is looking to semi retire as he is nearly 65. His son is an employee and has been for over 20 years. The father is looking to give his son one of the van's and the equipment worth around £8000 and a payment of £5000 so that he can start his own business and take over some of the contracts. The £5000 could be put through the books as Redundancy pay but how is be best way to take the van out of the fathers business and pass it to the son? Will this create a balancing charge as AIA was claimed on the van and equipment? 

Thank you

 

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20th Jun 2018 17:25

Naturally, your client will need to check the statutory redundancy position. I doubt there are any contractual redundancy entitlements involved, but this too should be checked. If so the transfer of the van could be used to satisfy all or part of these, in which case the usual employment related tax and NI rules will apply. Therefore it's possible that it might therefore be covered by the £30,000 tax and NI-free amount.

From the father's perspective, the transfer of the van and equipment on which allowances have been claimed will be disposals deemed to be at market value, because the parties are connected (s.567 CAA 2001). Thus a balance charge will arise.

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to tonycourt
20th Jun 2018 17:35

Thank you for your reply. That's what I thought.

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to tonycourt
20th Jun 2018 18:32

Any thoughts Tony on the £5,000 from the father's perspective?

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to Tax Dragon
20th Jun 2018 18:48

As long as the business is continuing, albeit in a reduced capacity, I see no reason why it shouldn't be tax deductible from profits.

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to tonycourt
20th Jun 2018 19:06

It's a gift to an employee so s/he can set up in opposition. Anything less business driven is hard to imagine.

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By Ruddles
to tonycourt
20th Jun 2018 19:20

tonycourt wrote:
the transfer of the van and equipment on which allowances have been claimed will be disposals deemed to be at market value, because the parties are connected (s.567 CAA 2001). Thus a balance charge will arise.

s61?

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to Ruddles
20th Jun 2018 20:15

Ugh! Thanks. That'll teach me to work from memory. Wrong route of asset for s.567, s.61 it is.

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By zebaa
20th Jun 2018 18:36

But if a father gives a son a gift of £13k (8+5) there is no NI, no, IT, etc. Keep it simple. I understand the desire to have the tax cake, but you can't have it and eat it.

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to zebaa
20th Jun 2018 18:46

Yes, but you're overlooking the statutory and contractual redundancy position. Plus the gift comes out of taxed income.

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to zebaa
20th Jun 2018 19:02

Or they could do what normal people do and bring the son in as a partner with a view to taking over.

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to Tax Dragon
20th Jun 2018 20:18

A sensible idea, but might result in a CGT charge on goodwill when father finally retires.

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to tonycourt
21st Jun 2018 21:59

It's a possibility. But a pretty remote one. And better to transfer goodwill within the partnership than outside one, as mooted in the OP.

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