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Transferring ownership of company vehicle

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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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RLI
By lionofludesch
19th Aug 2021 18:21

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 ?

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Replying to lionofludesch:
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By Anon373828
19th Aug 2021 20:13

I’m just looking for another solution. If this is the only way to do it then so be it.

The van is technically his as we are both 50/50 in this company and have the same vans worth the same amount, so surely him getting the van for nothing is the only fair way to do this?

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By Paul Crowley
19th Aug 2021 18:28

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

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By Paul Crowley
19th Aug 2021 18:31

Still you clearly have no faith in your accountant so perhaps time to find the dishonest accountant that makes all tax disappear.

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By Anon373828
19th Aug 2021 20:06

Calm down mate and leave your assumptions at the door.

I have faith in my accountant I just wanted a second opinion.

If the company were to retain the van there wouldn’t be any payments for its use.

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By Paul Crowley
19th Aug 2021 20:46

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

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RLI
By lionofludesch
19th Aug 2021 18:39

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 .....

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Replying to lionofludesch:
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By Anon373828
19th Aug 2021 20:07

Kind of yeah, company assets will be split in half and I will be sole share holder.

The company isn’t really worth anything we are just subcontractors with no staff or premises.

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Replying to Anon373828:
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By lionofludesch
19th Aug 2021 20:25

So he's buying the company van and you're buying his shares.

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By Anon373828
19th Aug 2021 20:30

Essentially yes

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By David Ex
19th Aug 2021 20:37

Anon373828 wrote:

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.

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By Paul Crowley
19th Aug 2021 18:57

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

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By Anon373828
19th Aug 2021 20:29

Company bill is £3900 of which we are each responsible for half, so £1950 each. Is it reasonable to expect him to pay the difference between that and the full tax relief he will receive as sole trader (approx £1530)?

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By lionofludesch
19th Aug 2021 20:38

No, the company is responsible for its own tax bill.

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By Anon373828
19th Aug 2021 20:44

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.

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By Paul Crowley
19th Aug 2021 20:51

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

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Replying to Paul Crowley:
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By Anon373828
19th Aug 2021 21:01

But we would get tax relief as sole traders yes? Can you let me know how you came to the £3480 figure?

I’ve got no issue paying the tax just want to make sure I’m not overpaying.

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By Paul Crowley
19th Aug 2021 21:28

£12,000 incuding vat
Tax at 20% NI at 9%
£3,480

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By Anon373828
19th Aug 2021 21:34

So by dissolving company we are only net £420 worse off?

£3900 - £3480

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Replying to Anon373828:
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By lionofludesch
19th Aug 2021 22:03

Anon373828 wrote:

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.

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By Paul Crowley
19th Aug 2021 22:04

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

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Replying to Anon373828:
RLI
By lionofludesch
19th Aug 2021 20:53

Anon373828 wrote:

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.

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By Anon373828
19th Aug 2021 21:06

Will do thanks. I think I have a slightly better understanding now so will be able ask him the right questions this time.

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By Paul Crowley
20th Aug 2021 01:33

Sounds to me like he gave you correct opinions
This sort of stuff could be handled by my most junior staff

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By Anon373828
20th Aug 2021 20:08

No harm in checking is there Paul.

Got to make sure these accountants are working for us and not the tax man!

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By DKB-Sheffield
20th Aug 2021 20:11

You mean some accountants aren't on commission from HMRC? I love receiving my monthly cheque through the post!

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By Leywood
21st Aug 2021 08:05

[quote=Anon373828] ‘’Got to make sure these accountants are working for us and not the tax man!’’

What an utterly ridiculous thing to say

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By Anon373828
23rd Aug 2021 16:39

Its a joke mate relax

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By AndyC555
20th Aug 2021 11:12

"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.

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By lionofludesch
20th Aug 2021 11:28

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.

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By kestrepo
20th Aug 2021 10:48

How old are the vehicles please?

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By Anon373828
20th Aug 2021 19:34

One is 65 plate the other is a 17 plate.

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By DKB-Sheffield
20th Aug 2021 20:08

So how, pray tell, are these the same vans with the same MV (as indicated in your earlier response)?

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By Leywood
21st Aug 2021 08:07

Maybe he thinks HE is working for the taxman with that one!

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By Anon373828
23rd Aug 2021 16:41

One has a higher mileage and some damage.

Happy?

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