A Limited Company with several interests in the travel industry purchased a BnB business in late 2014 paying 110,000 for the goodwill and 20,000 for the F&F. They added a further 30,000 of F&F after purchase.
They are now selling the BnB part of the business and hope to get 130,000 for the goodwill and 15,000 for the F&F.
Amortisation of the goodwill since purchase has been 100,000 and the F&F have been written down to NIL. AIA and CA have been claimed on all the F&F.
So the goodwill has a NBV and TWDV of 10,000 and the F&F have a NBV and TWDV of NIL.
Mu understanding is that the profit on the sale of the goodwill is 120,000 (130,000 proceeds less TWDV of 10,000) and the profit on the sale of the F&F is 15,000 (15,000 less NIL) and these amounts are included on the CT computation. The company have a large amount of brought forward tax losses which will reduce the CT payable
I do a lot more sole traders than Limited Companies so I just wanted to check I had the basics for the CT600 right.
Also will VAT need to be charged on the sale of these assets?
Replies (10)
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There’s not really enough information in the post. Rather than tease it out, I agree with the initial response.
Thank you for the further info. I’m happy to assist here. I don’t think you are missing anything, the only point to confirm for the avoidance of doubt being that the business was not purchased from a related party.
You mention VAT in your question- it depends on whether what is being sold is capable of being run as a continuing business. Most BnBs that I know of involve a property - what exactly is being sold here?
....what exactly is being sold here?
OP, without this, we cannot answer the question and we cannot confirm whether you are missing anything. (Dreadful pun alert: it's the key piece of information - who sold the key to the door of the B+B?)
It depends on the sale contract. If purely an asset sale its VAT (not sure on the goodwill though). If as a "going concern" then if the VAT clause is in there and the buyer is registered no VAT.
Property is a different kettle of fish. Not sure how you sell a BnB business without property.
Agree with Taxdragon below.
IMHO, the planning based on separation of goodwill from the property (whenever that happened - could be that your current vendors bought that structure from the previous owner, could be they implemented it themselves) is built on sand. As has been implied in another current FHL thread, any 'goodwill' tends to depend primarily on the location - i.e. it attaches to the property, not the business operators. For similar reasons, I'm not convinced that the company has a viable business without the property, so VAT may well be chargeable.
But I'm not sure I would try to rewind it. To some extent, they are paying the price now anyway, with the loss of ER (as we all know it). (And a well advised purchaser, might worry about that on their own future sale.)
It's one of those difficult situations that often arise with new clients.
I would say that this is one for the VAT experts - there are a couple on this site and if you are lucky one of them might happen to chance upon this thread.
I share Tax Dragon's uncertainty - while it appears that what the purchaser is acquiring is a going concern the components are coming from different vendors - neither component on its own able to be run as a business. But, I need to stop here because I really don't know the correct answer.
Can I throw in the possibility of a lease or licence for use of the business portion of the property to the company. It would make more sense than separation of the property from the Goodwill.