A sole trader closed her business bank account in February, and donated the remaining money in the account to a community organisation that took on the business from that date. The community group want her to include the period to the end of the tax year in her tax return, as they don't want to start their accounts until 6th April. A small loss will have been made during this period.
Politically, it's easier for her to include it in her return, but she doesn't want to do this, and is looking for a good reason to refuse to do it.
Are there any rules or potential problems that she can use to justify her refusal to include it, or any reasons why she should/must not include it?
And just to prove here that beggers can be choosers. lol. She gives them a gift and they have a strop. Think that I might be prone to tell them where to stick their community group (clue, the sun don't shine there).
I assume that we are talking about one months variance rather than thirteen months here.
we are talking about a sole trader, not a limited company here so isn't it a sale (gift) of the sole traders assets which was made in Feb then the business starts again with the assets now belonging to a new business in April.
All assets would be treated as though purchased by the new business on the first day of trading, not the date of the transfer. The gap between the two dates there was no business.
If there was a business between those two dates (i.e there was trade which the community interest group was benefiting from) then its the community interests groups problem as your client had already gifted the business to them in February.
I think that your client needs to learn the immortal words passed down from generation to generation of accountant :
"and that's my problem how?".
(taught to me by a very wise Chartered).
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
There were no sales in the two months, although there were expenses.
So it's nothing to do with the person who asked me (she's not a client, but a very useful contact), as she didn't own it any more, and shouldn't put it on her return.
The new owners started trading in April, so it's reasonable for them to start their accounts from that date. So they either:
1) Ignore the February/March expenses, as the business wasn't trading, or
2) Treat them as startup costs and include them in the accounts from April
Which they do is presumably up to them, as the tax man would be quite happy to get a bit of extra money if they ignore them (assuming they make a taxable profit).
Sticking things where the sun doesn't shine isn't a wise move, as they're all part of the close knit festival/alternative scene, where everyone knows everyone else!
as they're all part of the close knit festival/alternative scene, where everyone knows everyone else!
Oh dear, she really shouldn't encourage them by giving them stuff you know as the next thing you'll have wrong coloured houses, the scent of patchouli oil and Toyota Prius's everywhere.
Whatever happened to good old fashioned hippies... Oh yes, they all grew up and became marchant bankers didn't they, lol.
But seriously, I would go with treating those two months as pre trading expenditure introduced to the business on day one of trading (April 6th).... But then from what I'm reading she's your freind and you don't represent them so like your freind, how they handle this is not your problem.
Then again, it's good to be armed with what they should do even if you don't offer the advice unless they pay you for it.... And they're the only one's who should be paying for anything as they've got the business.
... Why on earth did she just give them a business.... Was there some sort of tax break involved in it? Was the business on the point of collapse? Couldn't she get anything for the assets? If she got anything at all in return (doesn't need to be money, can be an asset, service or obligation) then there was consideration and it was a sale, not a gift...
I'm assuming here that the community group is recognised as a chartity (seems wrong considering the description that they would get that status so thought worth checking) and she has completed a gift aid declaration (otherwise what evidence does she have that the business is no longer hers?).
The whole area of capital allowances around donations is a bit of an alien concept to me so fingers crossed someone else on here with more charity knowledge will have more details in relation to your freinds tax situation over the donation and whether she is just able to donate a whole business and walk away from it.
Just as a brain dump I see this that she is effectively saying that the business has no value in itself and that as the assets are gifted they are deemed to have zero value so it would make sense to me that she would have no tax liability on that but would prefer to have someone else confirm the scenario.
On the seperate matter of who has responsibility after the gift was made though its the recipients of the gift, not your freind and if I were her I would be rightfully miffed that they've been given a business and they are still not satisfied.
Seems like a person who cannot afford a car being given a brand new one for free and them then throwing a hissy fit that it's not the colour that they wanted.... Bet your glad that they're not your clients as they sound awful.
-- Edited by Shamus on Tuesday 6th of January 2015 07:42:06 PM
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
You just live on another planet Shaun . Or are you an ex hippy who became a banker?
I think what you've suggested is a logical solution for her. I will suggest she checks out her situation with regard to disposing of the business. I didn't ask what the business is, so don't know if there's any real value to it. My head is full of marketing funnels and IT today, so I didn't want to get too involved, but it's worth scoring a few brownie points that could be paid back sometime.
Ex biker / hippy type from the planet Zarrg.... Who got better and became a banker!
Surprising how many ICB people actually pronounce that with a W when referring to me
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
. Or are you an ex hippy who became a banker?
