I have a electrical company (ltd) with a friend and he is leaving to go sole trader.
We have 2 vans (worth approx £10k +vat each) which the company own and we want to transfer ownership of 1 to him. According to my accountant we will have to pay vat on the sale (?) and corporation tax as well.
Is this correct? If so is there a more tax efficient way to do this? It seems daft that this is going to cost us approximately £4k. We are open to the company still owning the van if that is a possibility.
Thanks in advance!
Replies (35)
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Not sure why you think it's daft.
Your company has sold him a van and, as he seems to be a connected party, you need to value it at market value.
Your company has, presumably, claimed tax allowances on it in the past and you'll need to repay these. Or, more likely, some of them.
The departing friend will be able to make his own claims.
Why doesn't he pay the company for his van ? Is there some element of barter here ?
The company got tax relief and VAT relief IN FULL when it bought the van.
You are looking for a solution that does not exist
If the company rents the van to sole trader it will pay VAT and Corporation tax on the rent
Still you clearly have no faith in your accountant so perhaps time to find the dishonest accountant that makes all tax disappear.
Then there would be other issues as not being used for the benefit of company
It is a company not a partnership and company has claimed and benefitted from the full VAT refund and claimed the full tax cost as a tax allowance
Hence the need to payback as company has a thing worth £10K
Is the company giving him a van and he's giving you his shares in return ?
Because there's a whole new raft of problems and questions opening up there .....
The company isn’t really worth anything we are just subcontractors with no staff or premises.
It might not have any assets but it might have some liabilities. Hope you’re not managing the sale without legal advice.
If sole trader registers for tax then he get taxs and NI relief of £3480
If sole trader registers for VAT he gets VAT back of £2,000 but loses £580
Sale trader get overall tax relief of £4,900
Company only pays £3,900
Sounds like a bargain for the person departing
The company is worth £20,000, being the vans
Company will need to pay VAT on both vans, being £4,000
And corporation tax on the £20,000 is £3,800
The taxes are due whatever solution you come to
So by dissolving company we are only net £420 worse off?
£3900 - £3480
Could be more complicated than that.
We don't have much information.
That is each
per vehicle
BUT looking only at the vehicles. assuming neither trader registers for Vat
And figures are over time, not instant cash back
Im thinking its just better to dissolve the company and i’ll register as a sole trader as well? Theres no real benefit to me keeping the company other than admin.
You might be right but then you'd have to repay the tax relief on your van as well.
You need to talk it through with your accountant.
Sounds to me like he gave you correct opinions
This sort of stuff could be handled by my most junior staff
You mean some accountants aren't on commission from HMRC? I love receiving my monthly cheque through the post!
[quote=Anon373828] ‘’Got to make sure these accountants are working for us and not the tax man!’’
What an utterly ridiculous thing to say
"Im thinking its just better to dissolve the company "
Do remember that as a sole trader you will lose the Limited Liability afforded by trading through such a company. If anything goes wrong, you'd be sued personally and so everything you own is potentially at risk. It's why limited liability was introduced in the first place.
And don't forget to re-insure the vans in your respective names.
Are they on finance ? If so, you might have to pay the loans off.
So how, pray tell, are these the same vans with the same MV (as indicated in your earlier response)?