I've been running a business as a Sole Trader that has recently been transferred to a limited company. I've always done my own accounts for the sole trader business, and am trying to work out how to account for the transfer of several items of hardware (computer etc.) to the limited company in the final Sole Trader accounts. I have previously claimed full income tax relief for the purchase of these items, in the year of purchase (they haven't been deprecated over multiple years).
Do I have to record the income from the sale of these items to the limited company in the same way as any other income to the business (and hence pay 40% income tax on that income), or is there another way?
Hi Tom
Sorry but we cannot give advice on this site as it is for swapping information between fellow professionals only. Also - there is not enough information here to be able to provide the kind of advice you need. You really need to get a fully trained Accountant on board with this one as you need to make sure that all aspects are covered including ensuring the goodwill is dealt with properly and efficiently (you need to involve HMRC in this at an early stage) as this could have implications for you on a personal tax front as well. I know you have done your own up to now but there are times when paying a properly trained professional is money well spent (indeed they may saves you a lot in this kind of instance!!!!!!)
__________________
Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
Assuming there is no goodwill in the business as mentioned above would transfer the assets at their tax written down value that way you wont need to pay tax personally. If the tax written down value is £0 which I suspect it will be then transfer assets at market value. You will have a balancing charge on disposal on which you will pay tax personally but the company will be able to claim tax relief on the same value but only at corporate rates which are currently 20% as opposed to paying tax personally at 40% if you are a higher rate taxpayer.
Thank you both for your replies. I am hoping that this is indeed straightforward - the market value of the equipment from the time of transfer is small (around £1500), and the tax written down value is £0. I'm using an accountant for the limited company accounts, so they will handle the purchase by the new company and Corporation tax going forwards, it's only the accounts for the sale as a Sole Trader I'm trying to get right.
So basically I should treat this as income into the sole trader business, and it counts towards profits in the usual way (which will then be taxed at my personal income tax rate)?
