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bigduckontax, Accountant
Category: Tax
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A client ran a fish & chip shop as incorporated for 7 years

Customer Question

A client ran a fish & chip shop as incorporated for 7 years and on 31/03/2013 he ceased trading. From 06/04/2013 he commenced trading in partnership with one of his friend who he agreed to sell but it was agreed that until full money is received he will be 50% partner. Half of money was received in 2012-13. Application to dissolve the company was made on 10/12/2013 and it was dissolved on 27/03/2014. Company's accounts were prepared up to 31/03/2013.
Can some body throw some light that:
(a) Is disposal to be treated taken place in 2012-13? If so , is the disposal 50% as client holds 50% share himself in the new business.
(b) Will this transaction attract Entrepreneurs relief for capital gains purposes whether it is treated happened in 2012-13 or 2013-14?
Submitted: 3 years ago.
Category: Tax
Expert:  bigduckontax replied 3 years ago.
Hello, I'm Keith and happy to help you with your question.
The sale would appear to have been made in the 12/13 tax year even though full consideration was not received at the point of sale and so the capital gain, if any, would be liable to Capital Gains Tax in that tax year. gives the following opinion regarding staggered payments:
'TCGA 1992, s 28 deals with the timing of disposals under contracts; vital if your impending disposal is approaching the cusp of two tax years or CT accounting periods. But where the amount of sales proceeds is known at the time of, though not due until after the disposal date then s 48 demands that they are still assessed in full ‘without any discount for postponement
of the right to receive any part of it.
In any event Entreprebeurs' Relief will almost certainly apply and that will reduce the rate tax due after the Annual Exempt Amount to 10% flat rate instead of the normal 18% or 28%.
I do hope I have shed some light on your situation for you and resolved your conundrum.
Customer: replied 3 years ago.

If so , is the disposal 50% as client holds 50% share himself in the new business.

Question at (a) is partly answered. Will you give complete response, not detailed, to it. Part of question not answered is recopied above.

Expert:  bigduckontax replied 3 years ago.
No, the full disposal is deemed to have take place in the earlier tax year as I told you. There are two businesses, one through a limited company which he has closed and a new one he has started in partnership.
I told you that Entrepreneurs Relief would almost certainly apply in any tax year in which the disposal was deemed to have taken place.
There is an outside possibility that HMRC might accept an entitlement to Roll Over relief which would merely postpone payment on the gain until some future cessation of the new business.