Hi guys,
Sole trader sells business for MV (£100,000) to new limited company. Consideration is split, £1 for assets (MV ~£5,000) to enable balancing allowance for capital gains, £99,999 for goodwill (being the balance of the £100k).
It is understood that the TWDV for the assets will be £1, but for the limited company accounting, should the company book assets and goodwill at MV rather than the actual consideration split? My concern for the latter is that the MV is the sole trader's "rough guess". It would take him too long and too much money to get each asset valued.
Thanks
Replies (3)
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I wouldn't accept a rough guess.
I would at least want to know exactly what these assets consist of.
I would possibly record at cost initially and then revalue, but only if a value can be ascertained beyond the client's rough guess.
Is the client being lazy?
What is the nbv in the sole trade accounts?
5k is not a lot. Surely not that difficult to ascertain mv?
The case in the link below suggests that if (in a composite transaction at least) you value things artificially (high or low) for a tax advantage they will be valued "realistically" at MV instead.