Tony S
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Incorporation of Ltd co not disclosed on 2014/15 SATR

Incorporation of Ltd co not disclosed on 2014...

I have a new client, a hairdresser; they used to be a sole trader until incorporating as a Ltd company in Sep 2014. A friend of theirs does the books and prepares her personal tax return. I am currently preparing the accounts and Company tax return for the first year, Aug 2015.

The incorporation of the business wasn't disclosed as a disposal on the clients 2014/15 personal tax return. The business was worth about £55k, £5k assets, £50k goodwill. the client did try to sell the business for this amount in early 2014.

I'm assuming we need to amend the 2014/15 return to include the disposal. Do I need to complete a CG34 form to go to HMRC? Or can I just use the £55k valuation made by the agent when the client was looking to sell the business?

Also, as the company was incorporated pre 3 Dec 2014 I assume corporation tax relief is available on the amortisation of the goodwill?

Note: I am looking to claim incorporation tax relief rather the pay CGT.

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07th Mar 2016 12:26

No

If your client merely exchanged her existing business for shares in the company, and has not created a Directors Loan account for that value, there is no chargeable gain and nothing to report.  Incorporation relief applies automatically - you only have the option to elect to dis-apply if I remember rightly.

CG34 can only be submitted in any event before a SA return is submitted.

Goodwill would have depended more on the date she started trading originally than the date of incorporation

 

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By Tony S
07th Mar 2016 13:22

She started trading in 2005

Thanks you for your helpful reply Marion.

She started trading in 2005 

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07th Mar 2016 14:27

Okay

so trade started after relevant date to count, but I would have to research incorporation relief further to find out if it actually creates a consideration which can be amortised, or if it acts like a kind of holdover relief which gives the company her acquisition cost which was zero.

I haven't got time now as starting school run but maybe one of the others will know if I am just jumping at shadows.

I will look later if  no one else has stepped in

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