Sole Trader to Ltd Co - Assets Transfer

Sole Trader to Ltd Co - Assets Transfer

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I have recently taken on a new client and am dealing with their transition from sole trader to limited company.

I am preparing their sole trader accounts to 31 March 2015 (cessation). As the limited company is taking over the sole trader business as a going concern, with the capital allowances, do I have to calculate the net book value in the normal way then carry it forward to the limited company, or do I have an option to put a value of the pool at cessation and transfer that figure instead?

The reason I ask is that the sole trader has a WDV B/F of £10k but the calculated value at cessation would be £6.5k, giving a balancing allowance of £3.5k, which is more favourable than carrying forward the NBV.

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By RichardBrown
23rd Jul 2015 13:35

On further digging, it would seem as though there would have to be an election made under CAA 2001, s266 to apply for the WDV to be carried forward as a going concern. I would therefore assume that putting a value on the assets at cessation and subsequently claiming a balancing allowance as the sole trader would be acceptable. The market value of the assets, £6.5k, could then be introduced into the limited company but not claimed under AIA as it is an associated business. Have I answered my own question correctly?

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By SimonLever
23rd Jul 2015 13:57

AIA

You cannot claim AIA in the year of cessation as well so check your figures again.

You are correct but I tend to transfer the assets at WDV for tax purposes as it makes things simpler.

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By RichardBrown
23rd Jul 2015 14:05

Thanks Simon. No AIA are being claimed in the year of cessation. Although tranferring the assets at WDV would be simpler, in this case, wouldn't be more tax efficient.

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