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DH


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Business ceased trading and goodwill received
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Hi All

I am doing the bookkeeping for a business which ceased trading in 2017. There was some plant & machinery which i have disposed off at tax written down value so effectively nil proceeds. The bit thats confusing me is the business received £40k for the sale of its customer base/contacts etc. I assume this is the goodwill which the purchaser bought. How do i account for the £40k coming into the business. Do i use it as the proceeds in my fixed asset disposal journal? If i do then there will be a small loss on disposal of fixed assets [the NBV was around £25k]. And if so does this loss on dispoal of around £5k  then get added back in the tax comp as usual?



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Cheshire


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What a strange full profile name 'bookkeeper me'!

So hows about an intro before we start. We always ask newbies!

Usual stuff - what prof body do you belong to, do you work for yourself or in a practice/ firm, are you a bookkeeper or accountant, what qualifications, how long in role, where up to in your studies-what exams passed/with what body/in midst of doing, where based, what you did before this role? That sort of thing. Helps get to know you but also how best to pitch answers.

Why have you written down at 'tax written down value'?

What happened to the P&M, was it part of the deal, what was the MV?

Have you seen the business sale contract?

What status of business?

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 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
Cheshire


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Just seen this has been asked before and you have ignored a couple of respondent posts.

For anyone else, check out the previous posts.

As I've said before, not the way to go about getting future answers.

Get your Accountant on the case.

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 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
DH


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Hi, thanks for your reply
Ok, I am AAT qualified and work in a small practice. I have been given a small portfolio of clients to work on and quite a few cessation accounts.
The accounts are produced on a break up basis - the company is being struck off/dissolved by dissolution form CS01 and not being sold.
The P&M therefore deemed to transfer to owner at realisable value which is nil.
I'm just not sure how to deal with the goodwill which was given to the company for the customer base.
Thanks again



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Cheshire


Master Book-keeper

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Why realisable value, is that technically correct? In line with legislation?

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 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
DH


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Yes i believe it is. The fixed assets are not being sold to anyone and they are deemed to be transferred to the owner at their tax written down value which is nil

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Cheshire


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Believe/assume. Need to deal in facts.

What level of qualification, you didn't say.

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 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
DH


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Yes I did. AAT qualified.
Thanks. Any ideas about how to deal with the goodwill element anyone?

Look forward to hearing from you

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DH


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We are the Accountants. Just after a bit of advice please



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Cheshire


Master Book-keeper

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DH wrote:

Yes I did.

 Not what I asked you didn't.



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 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
Artois


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I think Joanne means which AAT qualification and at what Level!

Why are the P&M not being transferred at Market Value? I thought that this would be the case.

This may help with the Goodwill

https://www.gov.uk/tax-when-your-company-sells-assets

Is there no one at your practice who could assist you with these matters?

 



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Doug

These are only my opinions of how I see things and therefore should not be taken as advice
Duane


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Isn't it DS01 to dissolve a company?

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DH


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My certificate says qualified 1 December 2000. I did all the exams at that time, it sounds as though the qualification is multi-tiered now.


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