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Sale of Trade

Slight complication

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Looking for some advice re: LTD Co client who is selling up.  The background is:

1. Client was selling their house, the purchaser of his home included the sale of his business which was valued at £50,000. 

2. My client never physically received the £50,000.

3. Client has a SIPP which purchased the property from which the trade operates.

4. Client forms an LTD and trades for a number years.

5. The £50,000 is not recognised on the accounts.

6. My client now wants to sell the trade and has been offered £50,000 for it. 

Initially I advised him that the money belongs to the LTD, will be taxable on the company and from there he can withdraw balance of funds after settling the debts etc. and that the original accounts would have to be redone to bring in the £50,000 as goodwill and credited to the Directors account, then he could withdraw the balance of funds from the company after tax but he is insisting the he owns the trade.  He advised that the trade was never brought into LTD so the £50,000 should go directly to him as if he was making a capital disposal.  This is obviously more tax advantageous.

I've never had this situation before.  Can anyone advise?  Can the trade purchased by the Director be separated from the trade that was carried on by the LTD?  My last question makes me think no, they are one and the same but I just need some help with this.

It should be noted what the purchaser wants is actually the property, not the trade.  The trade will be cease on completion on the sale.  There will be 2 sale agreements, one to the SIPP who have agreed the value of the sale of the property.  But who should the other sale agreement be with, the LTD Co or the Director?






Replies (3)

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By memyself-eye
27th Oct 2016 19:28

A house for £50K?
I'll buy it....maybe...

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By alan.rolfe
31st Oct 2016 11:57

It seems like a case of personal v company goodwill. Some goodwill cannot be transferred to the company, but it will depend upon the facts and the nature of the goodwill. It is usually hard to argue that goodwill is retained outside the company if it is trading using the goodwill, but this is not impossible. A review of the trade will be needed to establish who owns the goodwill.

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Replying to alan.rolfe:
By BMary83
02nd Nov 2016 15:37

Would you mind if I sent you a quick pm with details on the trade? I believe you will it will be a quick answer once you know the trade.


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