Transfer of a sole trader into a Ltd company

Then opening balance sheet of an incorporated trade

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I am confused about the opening balance sheet of the Ltd becuase the asstets are transferred at OMV but you can claim to transfer the fixed assets at TWDV and stock at book values.Does it mean that the opening balnce sheet of the company will show assets at TWDV or at Market value. EG

 

Sole trader balance sheet has been trading for many years from a free hold property and wants to incorporate He values his business at 400k :

 

                          Book Value                      Market Value

 

F/Hold                     100k                                300k               Gain of 200k

Fixed assts(NBV)       50k                                 40k               TWDV £30k

stocks                          10k                                   8k

Debtors                          8k                                   8k

Bank                              3k                                    3k

Creditors                       (14k)                                (11k)

 

Goodwill bal fig                                                   52k

                                                                  ---------------------

Total price                                                      400k

                 

 He wil receive 400k £1 shares in exchange,

please advise if the above figures will be as the opening balance sheet because i am confused if i need to use the twdv for the assets for opening balance sheet

Replies (15)

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By Ruddles
26th Feb 2024 20:30

It's very simple - market (or book) value is an accounting issue, TWDV is all about tax.

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Replying to Ruddles:
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By Harry04
26th Feb 2024 20:36

So ,what figures do you use for preparing the annual accounts of the company?

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Replying to Harry04:
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By DKB-Sheffield
26th Feb 2024 20:47

Putting it another way (allowing you to work out the answer)...

Are you currently using NBV or TWDV in the sole trade accounts?

Your figures suggest the former... so why would you change to reporting at TWDV in the company accounts?

As Ruddles says... TWDV is nothing to do with annual accounts BUT will you need to consider DT?

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By Leywood
26th Feb 2024 20:41

Looking at your previous posts, I would strongly suggest you take some professional advice.

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By FactChecker
26th Feb 2024 20:52

What Ruddles says (and indeed what it 'says on the tin').

Have you really still (after nearly 15 years on here)not appointed an accountant to help you through the interesting ways in which you dip your toes in the water?
Not doing so in these circumstances could turn out quite expensive downstream.

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By paul.benny
27th Feb 2024 08:59

And when you appoint an accountant, they will probably explain why £400,000 share capital may be unwise.

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By Yossarian
27th Feb 2024 09:30

Harry04 wrote:

 He wil receive 400k £1 shares in exchange,

Big mistake. Appoint an accountant ASAP.

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Replying to Yossarian:
By Ruddles
27th Feb 2024 09:57

Why is it a mistake?

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Replying to Ruddles:
paddle steamer
By DJKL
27th Feb 2024 10:14

Could not introduce the cash into the company though hardly significant in the scale of the numbers.

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Replying to Ruddles:
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By Yossarian
27th Feb 2024 11:42

Because they need to consider the inflexibility of lumbering themselves with £400k of share capital.

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Replying to Yossarian:
By Ruddles
27th Feb 2024 13:11

What would you suggest, then - consideration to be left on loan?

Perhaps they have already considered the inflexibility of SC, but s162 relief is more important to them?

I agree what it would be a mistake to proceed without considering all options, but choosing to take share capital as consideration is not necessarily a mistake as you suggest, even though it isn't something that you would have done.

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paddle steamer
By DJKL
27th Feb 2024 09:34

Who valued the goodwill?

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By Bobbo
27th Feb 2024 12:11

From the description of it as a balancing figure, it seems the calculator valued it.

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By Paul Crowley
27th Feb 2024 16:00

That is the the definition of goodwill, the excess paid over the fair value of assets. But DJLK's point is valid.

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paddle steamer
By DJKL
27th Feb 2024 16:05

Well certainly with an incorporation where buyer and seller are the same party.

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