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CGT/GOODWILL/CT

Customer Question

Hi there I wonder whether you can help me here.


 


Two individuals bought a company for £230 paying £70 to acquire shares (stamp duty paid) and balance £150 by settling a debt owed by the company. After couple of years they sold the business (not the company) for £625 (incl net assets £25). Does the company liable for CGT and how much? were there any reliefs available?


 


Now the company is looking to buy a freehold pub (just buying the building not as a going concern) for £750. Would there be any relief available with this purchase?


 


Also do you think the company could have accounted Goodwill at any time? Before the business was sold for £625, there was an offer for £700 but it didn't materialised


 


Appreciate your help

Submitted: 3 years ago.
Category: Tax
Expert:  TaxRobin replied 3 years ago.
Hello and thank you for posting your question.
Even after reading my responses you should work closely with the tax professional for your company to report the sell and deal with all the concerns.
The sell of the company asset (the business) is a chargeable sale. When you work out the the gain or loss you have to do that separately for each chargeable asset. The cost of the business is what was paid and the debt that was owed. The difference in this and the price received would be the gain. You would be able to deduct the stamp duty tax and expenses of acquiring and selling.
If the pub building is purchased and the business is not, then VAT would be chargeable on the sale.
Your question on Goodwill is still open for interpretation. The view now (since SDLT) is that if a business is sold as a going concern then the sale must include some element of goodwill. The question to be answered is not whether goodwill exists but what is the value of that goodwill? That question has to be decided on the facts of each individual case. In some cases the value of the goodwill may be nominal but in some it may be substantial.
When valuing Goodwill, you would need to look at the benefit of any contracts with customers, staff and suppliers would either have to be acquired separately from the vendor or the purchaser would have to make their own arrangements.

I sincerely XXXXX XXXXX the above information is helpful as you prepare to meet with your accountant. They will be better prepared to delve deeper into your specific situation.
Customer: replied 3 years ago.

Hi


Are you of the opinion that the initial cost £230 + stamp duty can be offset to the sale £625 to calculate the gain? Please note £230 was made up of £30 paid for the shares of the company by new owners to acquire the company & £150 to settle company's debt.


 


Primary question here is how much would be the gain? and the gain qualifies for any relief please


 


I assume the VAT on pub purchase depends on whether the seller has opted for VAT?

Customer: replied 3 years ago.
Relist: Answer quality.
How wanted to know how much would be the capital gain on the sale of the business and any relief available
Customer: replied 3 years ago.

Hi

I have asked for clarification which I did not get an answer yet

Expert:  Nicola-mod replied 3 years ago.
Hello,

It seems the professional has left this conversation. This happens occasionally, and it's usually because the professional thinks that someone else might be a better match for your question. I've been working hard to find a new professional to assist you with your question, but sometimes finding the right professional can take a little longer than expected.

I wonder whether you're OK with continuing to wait for an answer. If you are, please let me know and I will continue my search. If not, feel free to let me know and I will cancel this question for you.

Thank you!
Nicola
Customer: replied 3 years ago.
Hi
I am ok to wait but how long?
Expert:  Nicola-mod replied 3 years ago.
Hello,

I'm afraid I cannot guarantee a time. We will continue to look for a Professional to assist you.

Thank you for your patience,
Nicola

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