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 bigduckontax Your Own Question

bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 2993
Experience:  FCCA FCMA CGMA ACIS
75394688
Type Your Tax Question Here...
bigduckontax is online now

One of our client (Trade: Fish & Chip Shop) made an agreement

Customer Question

One of our client (Trade: Fish & Chip Shop) made an agreement with another person to sell his leasehold shop for £ 100,000.According to that agreement the purchaser will try and manage the shop for three months and after 3 months if he wants to back out he will hand over the shop to the vendor and the vendor will keep the £20,000 out of the lump sum of 100,000 which he paid initially.
The vendor will pay back the rest of £ 80,000 within one year to the buyer.
.The purchaser handed back the shop to the vendor after 3 months as per the terms of the agreement.All this happen with in the same tax Year
My questions are:
1:- Shall we treat this as a disposal?
2:-If we treat this as disposal could we have to show 20,000 as gain?
3:-If we don't consider this as disposal is there any other treatment for this.
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.
Hello, I am Keith, one of the experts on Just Answer, and happy to help you with your question.
I would be inclined to declare this as a capital gain. It would then be taxed, after deduction of the Annual Exempt Amount of 11.1K, at 18% or 28% or a combination of the two rates depending on the income including the gain in the year of sale. Worst case scenario is:
20K - 11.1K = 8.9K @ 28% = say 2.5K tax.
If it goes through the books as income then the tax charge would be at a minimum 20% and:
20K @ 20% = 4K tax due.
Simple, as the Merkaat in the TV advert would say!
I do hope my answer has been of some assistance.
Customer: replied 1 year ago.

Would kindly quote authority by which we can treat the said transaction as gain for my future / file reference.

Thanks

Expert:  bigduckontax replied 1 year ago.
There is no authority needed, it is standard Capital Gains Tax (CGT) procedure. If the sale takes place at the 3 month point then the gain is subject to the tax. If it falls through there is no CGT, but the 20K would be trading income in the hands of the prospective vendor.

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