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: 3356
Experience:  FCCA FCMA CGMA ACIS
75394688
Type Your Tax Question Here...
bigduckontax is online now

I am an employee of a partnership. My division is being sold.

Customer Question

I am an employee of a partnership. My division is being sold. I will receive part of the proceeds from the sale for the clients that I originally brought with me in to the business i.e. My client list. As I am not a partner how will this sum I receive be taxed. The payment I receive will be paid to me directly by the purchaser in 3 instalments. The list of clients I have is recognised in my contract. They are protected by being ring fenced against the normal restrictive covenants that apply. I not sure if this helps or hinders my chances of claiming that the payment I receive is a capital receipt. This would I beleive means I pay cgt rather than income tax. Thanks for your help.
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 am of the opinion that as an employee CGT does not come into the equation. The payments to you will not be a capital payment, but redundancy pay, subject to Income Tax (IT), the tax treatment for which is that the first 30K is tax free, the balance taxed at your marginal rate of tax.
The method of payment gives you some rattle room as if it spills over into another tax year the taxable element may fall to your advantage.
I am so sorry to have to rain on your parade.
Customer: replied 1 year ago.
Thanks Keith I will be working for the new company under TUPE with a slightly revised contract to reflect the fact that my employee list will no longer be recognised in my contract. The new company will pay me 3 instalments of £80k. I think this may change your assessment of me being made redundant but I am still struggling with how I might be taxed. Is my client list an asset? Is there a way of structuring it so that it is a capital payment? Regards philip
Expert:  bigduckontax replied 1 year ago.
Well that throws a spanner in the works Philip! HMRC are almost certain to class the whole 240K as salary, particularly as it is being paid by your new employer, and tax accordingly. Here is the Gov UK advice on TUPE transfers:
'When TUPE applies:
The employees’ jobs usually transfer over to the new company - exceptions could be if they’re made redundant or in some cases where the business is insolvent
Their employment terms and conditions transfer
continuity of employment is maintained
To find out if TUPE applies to your transfer, talk to Acas (the Advisory, Conciliation and Arbitration Service), Citizens Advice or, if you’re an employee, your trade union representative.'
Your client list might indeed be an asset, but the settlement would have to delineate that element separately. If so then that amount might be subject to CGT and Rollover Relief would apply, but that merely postpones the gain to some future, indeterminate date.
Customer: replied 1 year ago.
Thanks Keith very helpful. The purchase agreement will delineate my client list and the terms specify that payment is being made for the list. If so your last paragraph may apply? I don't mind paying cgt at 28% immediately but 45% and presumably employer NI would mean it is not attractive for either party if treated as salary. On balance do you think hmrc will still treat this as salary or as a capital payment? Thanks again
Expert:  bigduckontax replied 1 year ago.
Well certainly the non client list element, I would be inclined to negotiate the payment tranches to tax years to your best advantage. If the client list is classed as capital expenditure there will be no CGT at this stage as Rollover Relief will apply as I explained.
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3356
Experience: FCCA FCMA CGMA ACIS
bigduckontax and other Tax Specialists are ready to help you
Expert:  bigduckontax replied 1 year ago.
Thank you for your support.

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:

    7088
    26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
< Previous | Next >
  • http://ww2.justanswer.com/uploads/TA/Tax Expert/2013-8-21_231010_sam.64x64.jpg Sam's Avatar

    Sam

    Accountant

    Satisfied Customers:

    7088
    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:

    2333
    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:

    524
    International tax
  • /img/opt/shirt.png taxadvisor.uk's Avatar

    taxadvisor.uk

    Chartered Certified Accountant

    Satisfied Customers:

    2845
    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:

    270
    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.