How JustAnswer Works:

  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.

Ask TonyTax Your Own Question

TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15708
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
13905389
Type Your Tax Question Here...
TonyTax is online now

I Have a question about the transfer of business from a sole

Customer Question

I Have a question about the transfer of business from a sole trader to an incorporated company, where the sole proprietor becomes the only shareholder of the limited company. In particular when the business property is transferred into the company. Will there be a potential liability to CGT on such a transaction? I'm confused about what incorporation relief covers...
Submitted: 1 year ago.
Category: Tax
Expert:  TonyTax replied 1 year ago.
Hi.

Can you tell me what the nature of your business is please.
Customer: replied 1 year ago.

Hi there - it is a farm, and the asset is the farm land.

Thanks.

Expert:  TonyTax replied 1 year ago.

Thanks.

There is nothing to stop you putting all the business property into the company and claiming incorporation relief. The shares you receive in return will have a cost equal to the value of the business goodwill and the business assets but that will be reduced by the gain on the goodwill and the property when the shares are sold or the business is wound up and the assets disposed of.

If you sell the property to the company, you may be entitled to entrepreneurs' relief which if you qualify will reduce the CGT charge to a rate of 10%. As and when the company has cash recources, you can draw out the disposal proceeds tax free since the gain would already have been taxed.

If you gift the property to the company, you can claim holdover relief to defer the gain, the effect of which is to reduce its base cost for tax purposes by the deferred gain.

Take a look here for basic information on incorporation relief and here for a commentary of the more long term implications of business property ownership structures. There is information on business asset holdover relief here.

I hope this helps but let me know if you have any further questions.

Customer: replied 1 year ago.

Hi there thanks very much for your comprehensive answer. Can I ask one more question - on the transfer to the limited company you have emphasised that this be done in exchange for share capital in the limited company. Is there a good reason why part of the corresponding credit in the company could not be to Director's Loan, rather than share capital?

Expert:  TonyTax replied 1 year ago.
None at all. See example 2 here. Where some cash or a credit on the directors loan account is received or a credit, there may be CGT to pay.

What Customers are Saying:

 
 
 
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C.
< Previous | Next >
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C.
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex
  • Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult. GP
  • I couldn't be more satisfied! This is the site I will always come to when I need a second opinion. Justin
  • Just let me say that this encounter has been entirely professional and most helpful. I liked that I could ask additional questions and get answered in a very short turn around. Esther
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C.
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex
 
 
 

Meet The Experts:

 
 
 
  • Sam

    Sam

    Accountant

    Satisfied Customers:

    6894
    26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
< Last | Next >
  • http://ww2.justanswer.com/uploads/TA/Tax Expert/2013-8-21_231010_sam.64x64.jpg Sam's Avatar

    Sam

    Accountant

    Satisfied Customers:

    6894
    26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
  • http://ww2.justanswer.com/uploads/BI/bigduckontax/2013-8-12_222058_1.64x64.jpg bigduckontax's Avatar

    bigduckontax

    Accountant

    Satisfied Customers:

    1772
    FCCA FCMA CGMA ACIS
  • http://ww2.justanswer.com/uploads/TA/TaxRobin/2013-8-28_16186_femalebusinessprofessionalbinderhand11038485.64x64.jpg TaxRobin's Avatar

    TaxRobin

    Tax Consultant

    Satisfied Customers:

    464
    International tax
  • /img/opt/shirt.png taxadvisor.uk's Avatar

    taxadvisor.uk

    Chartered Certified Accountant

    Satisfied Customers:

    2596
    FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
  • http://ww2.justanswer.com/uploads/MS/MsAM/2012-6-9_16426_anna.64x64.jpeg Anna's Avatar

    Anna

    Teacher, writer, biologist

    Satisfied Customers:

    268
    Great research skills, variety of work experiences, teaching experience.
  • http://ww2.justanswer.com/uploads/PD/pdheslin/2012-6-6_232056_pambig.64x64.jpg pdheslin's Avatar

    pdheslin

    Consultant

    Satisfied Customers:

    51
    20+ years of internet site creation and search engine optimization. Dozens of search tools at my disposal.
 
 
 

Related Tax Questions