Can someone confirm I’ve understood this procedure? Thank you.
1. A Sole Trader incorporates under S165. Two of the three assets transferred to the company are:
A) Stock at cost £5000
B) P&M NBV £12000
2. At cessation the Sole Trader transfers £40% of the assets to his wife (who is integral to the business as an employee). The company shareholding is 60% Husband and 40% Wife.
3. The third asset is Goodwill given a value of £30,000. (This is not an unreasonable valuation). Of this £6000 of H’s Goodwill is subject to the S.165 Holdover and the couple each utilize their CGT Allowance. A combined DLA of £24000 is created.
My three questions are:
1. Is the Gain held over correct, the stock is transferred at cost (=MV) and the P&M is transferred at TWDV under S266 CAA 1991?
2. Could the transfer of 40% of the assets (or just 40% of the Goodwill) to his wife prior to the subsequent transfer to the company be challenged in some way.
3. The formal valuation of Goodwill is deferred under Statement of Practise SP8/92. It is effectively ‘created’ at the date of cessation due to the value of the business at that date. H will submit a HS295 claim but is this necessary for W?
If there are problems with the arrangement I’d appreciate someone telling me. The business only traded for a few weeks in its final period however the wife was paid as an employee in that period.
Thanks for any assistance given.