The company has no funds to pay for these assets and their value will simply be credited to the director's loan account. The assets are goods for resale and were acquired with the intention of being transferred to the company. They are appreciating assets and are intended to be held by the company for some 10-20 years before their eventual sale, i.e. no funds will be generated for 10-20 years. The assets have appreciated some over their initial cost and if market value was used as the base for the transfer, it would give rise to a capital gain for my client - who would then have tax to pay even though no funds had been generated and no cash had been received. It would seem fairer and more reasonable to use cost as the base for this transfer, given the long term nature of these assets. Crystalising a nominal gain at this early stage would not be fair and seems wrong, a bit like a company's stock being revalued each year at market value and the resulting book profits giving rise to an annual tax bill, again without any funds having been realised. This doesn't happen: stock is valued at the lower of cost or NRV, not the higher. Accordingly, given the long-term nature of these assets, would using cost as the basis for this transfer be acceptable? Obviously when the assets are eventually sold, the company would pay corporation tax on sale price less cost so there is no loss to HMRC. It is in effect just a timing issue. If my client does proceed with using cost for the transfer, is there any action he needs to take now? e.g. to advise HMRC or not?
Thanks for any assistance here, it will be appreciated.