What is the gain on the disposal of company

Gain on company disposal

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Dear all,

I have a new client that acquired a business 5/6 years ago, I have a copy of the final accounts prepared as at the date of disposal, which highights the following;

Goodwill £500k cost, £200k post amortisation

Tangible Assets £100k cost, £5k post amortisation

Net current liabilities of -£205k

Equity £0

The two shareholders sold the shares of the business for circa £450k, netting around £225 each.

From a capital gains perspective, the total shares of the business are 1000 @ £1, and therefore my question is, will the gain be;

a) £225k less £0.5k = £224.5k (proceeds less the proportinate share value), or

b) £225 less the goodwill of £250k = -£25k (proceeds less the proportinate goodwill at cost)

Many thanks for any help/advice you can provide.

Replies (4)

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By Tim Vane
08th Jul 2018 18:23

The answer is (c) something completely different.

If you have sold your company you need to seek professional advice. You have got hold of completely the wrong end of the proverbial stick.

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By The Innkeeper
08th Jul 2018 19:17

There is an implication from the first few words of your post that you are advising someone on this. I think that you should really check that your PI is adequate.

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By johngroganjga
08th Jul 2018 19:31

It’s £225k less the original cost of acquisition of the shares.

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By Tax Dragon
09th Jul 2018 06:39

Proceeds less cost less amount chargeable to income tax. Determining the last two elements requires more knowledge of what happened 5/6 years ago. Hopefully your new client took advice back then.

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