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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
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Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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My brother and I have equal shares in a partnership running

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My brother and I have equal shares in a partnership running a convenience store.We bought it for 100k 77,500 in goodwill and 22500 fixtures and fittings.We sold it to our Ltd company of which we own 80% of the shares between us for 105k goodwill and 5k fixtures and fittings.The goodwill was valued at 105k by an independent valuer.The value of the fixtures in the partnership after tax allowances is £5433.What is the capital gains calculation?
Submitted: 1 year ago.
Category: Tax
Expert:  taxadvisor.uk replied 1 year ago.
Thank you for your question.Sale of business to your LTD company has given rise to a gain on sale of goodwill (105,000-77,500) £27,500. This is shared equally between two owners. provided there were no other capital gains in the tax year, gain from sale of goodwill after gains allowance is (27,500-22,000) £5,500 or £2,750 each (2014-15 gains allowance). CGT rate applicable on this gain is 18%, 28% or a combination of two depending on your taxable incomeincluding the gain in the year of sale.You may be able to claim entrepreneurs relief on the capital gain on sale of your business provided you meet all conditions set out here (if you qualify then the CGT rate is 10%https://www.gov.uk/entrepreneurs-relief/eligibility Fixtures and fiitings are sold below the WDV of £5,433 and this would result in a balancing allowance of £433 to be set off against taxable profits of the partnership. I hope this is helpful and answers your question.If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.
Customer: replied 1 year ago.
One presumes that any costs of the sale and the initial purchase can be offset against the gain?
I checked the Entrepreneur relief and it would appear as the Ldt company and the partnership are connected parties we are not eligible...do you agree?
The partnership convenience store accounts ran from August to July....the business was sold in May 2014 so the final partnership accounts were submitted last year.....how do I claim the balancing charge?
Expert:  taxadvisor.uk replied 1 year ago.
Thank you for your reply. Any selling costs can be added to the initial purchase price and offset against the gain. You are correct in your understanding that sale of goodwill to a close company in relation to which you are a related party then any gain on goodwill included in that disposal will not be eligible for Entrepreneurs’ Relief.This applies if you dispose of the whole or part of your business on or after 3 December 2014 -- see under Disposal of Goodwill of your business herehttps://www.gov.uk/government/publications/entrepreneurs-relief-hs275-self-assessment-helpsheet/hs275-entrepreneurs-relief-2015The partnership accounts would be to May 2014 (tax year 2014-15). You can submit amended partnership tax return to HMRC to reflect balancing allowance (sales proceeds lower than tax WDV of assets sold).I hope this is helpful and answers your question.
Expert:  taxadvisor.uk replied 1 year ago.
HiJust checking in. How did things turn out?
Customer: replied 1 year ago.
sorry for the delay.......is there any indexation allowance to take into account in the capital gain calculation?
Expert:  taxadvisor.uk replied 1 year ago.
Thank you for your reply..There is no indexation allowance to take into account.More information on this can be found here - CG10243 Capital gains Tax Indexation allowancehttp://webarchive.nationalarchives.gov.uk/+/http://www.hmrc.gov.uk/manuals/cgmanual/cg10243.htm I hope this is helpful and answers your question.If there are no more issues, I will appreciate if you would kindly rate my service/accept the service I have provided before you leave the site, to ensure I get credited for it by Just Answer.
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Expert:  taxadvisor.uk replied 1 year ago.
I thank you for accepting my answer.
Best wishes

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