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Adam Hunt
Adam Hunt, Accountant
Category: Tax
Satisfied Customers: 384
Experience:  FCCA, FFA, FFTA
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I have a client who is incorporating from a sole trader. The

Customer Question

Hi I have a client who is incorporating from a sole trader. The Goodwill will be sold to the Ltd co at Market value and hence a CG will arise on the sole trader. When I introduce the goodwill into the Ltd co. is the Double entry DR Goodwill CR DLA? It will be about £120,000 so was nervous about crediting the loan account with this much to draw tax free without checking but not sure where else the credit could be?
JA: Which tax year is the tax credit for?
Customer: The company was formed 18/1/18 but she didn't tell me and the sole trader accounts were prepared as normal to 5/4/18 so I will have to do the transfer of assets after 5/4/2018 therefore in the 20018/19 tax year
JA: Anything else you want the Accountant to know before I connect you?
Customer: No I don't think so?
Submitted: 1 month ago.
Category: Tax
Expert:  Adam Hunt replied 1 month ago.

Hi, I am one of the experts. I will come back to you little later, plz bear with me.

Expert:  Adam Hunt replied 1 month ago.

You need to double check the validity of Goodwill as to if this asset exists for info. If in case Goodwill asset does exist already and you are just asking about double entry then Dr Goodwll and Cr Bank in the accounts of Ltd company or Dr Goodwill and Cr DLA and afterward Cr Bank and Dr DLA.

Expert:  Adam Hunt replied 1 month ago.

Hope I have answered your question?

Customer: replied 1 month ago.
Not sure what you mean? . The goodwill is in fact franchise fees that she has bought so effectively buying her client base as she provides private healthcare. So it definitely exists as she could sell them on. So ultimately the credit is DLA if I Dr goodwill/ franchise. Presumably then the amortisation if this is no longer eligible for CT relief despite when the sole trader business started?
Expert:  Adam Hunt replied 1 month ago.

Ok it makes sense. If you do not want to use incorporation relief again CGT then yes your treatment sounds good. Credit DLA.

Hope I have answered your question?