Please help. I have new client who took over business from his friend and they have signed purchase of business agreement. According to agreement buyer gets all business equipment such as different tools, cleaning machines and business van. Cost is 20k+Vat and is payable monty over 36 months. WHat is correct accounting treatment?
I am not very experienced and starting to create company in Sage. How would I account for this purchase? Do i need to list all equipment individually as assets, or do I create new suplier and post montly invoices there with code "machinery hire"? Do I post all 20k or do I do invoice every month?
Can they claim any capital allowances until agreement completion?
I am preparing first VAT return for this client using cash accounting. Do I claim VAT on payments for the purchase of the business donein this VAT period?
Any help greatly appreciated.
Replies (16)
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Oh dear.
There's no VAT on the transfer of a business.
Tell us more if you think I've misinterpreted the facts presented.
As you say, it's not HP as title passes on day 1.
You should clarify whether it is purchase of business (out of scope for VAT) or purchase of assets (VAT due). If the latter, the tax point is the sale date, even though payments are deferred - meaning that seller and buyer should both account for the VAT on the sale date.
Thank you for rely. I do VAT for him on Cash Accounting Scheme method, therefore will account for 3 payments made towards this purchase.
First, you need to establish whether there is any VAT.
I'm not seeing anything that suggests that VAT should be charged.
If it's not chargeable, it's not recoverable as input tax either.
If the seller is just doing a closing down sale and it's not transfer of business as a going concern, then VAT would be due. The OP's question is slightly ambiguous, as possibly is the sale agreement. I suspect that the agreement was drafted by a someone with insufficient knowledge.
It's hard to read "took over business" as anything but a going concern.
But I accept that the OP may not understand the issues.
Easybookz, eh ? It's never easy .....
What is the business? This may give some context as to whether £20k of assets may be the business.
Is your client also now using the same name as the old business?
Do you know that the old ‘business’ was vat registered?
Do you know that the old ‘business’ was vat registered?
Jeez - I hope so. The incomer is being charged VAT.
Did the new company get the old company's customer list ?
Did the old company sell any assets to anyone else ?