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Would this work? Idly musing....

MonsoonMonsoon Font Of All KnowledgeFMAAT, AAT Licensed Accountant Posts: 4,071
Company A is owned 50/50 and the director-shareholders fall out. One of them leaves. The remaining person, K wants to continue the business, but it's in a bit of a mess.

For various reasons, K decides the responsible thing to do is for Company A to cease trading.

K opens Company B and transfers the majority of the trade into it (paying market value for assets etc).

Company A sold a branded service called NooNoo. K doesn't like NooNoo, doesn't want to keep it and thinks it would be better to sell NooNoo at a point in the future when he's built it to a point worth selling.

Can K do the following:

Take on NooNoo personally, i.e. own the intellectual property and the brand, and licence its use to Company B.

Company B pay K an annual fee for using the brand, in retuern for retaining the profits, operational costs and liabilities from operating NooNoo.

When NooNoo is sold, this sale is a capital gain on K, and not taxable income for Company B.

Comments

  • RachelRachel Trusted Regular FMAAT, AAT Licensed Accountant Posts: 349
    Not sure if this is similar or not.

    I worked for a company that was a partnership and a LTD company. The two brothers owned the intellectual property and the LTD co sold it, each month the partnership invoiced the LTD for the licence and the LTD company invoiced back for office rent etc. There was quite a lenghty agreement. At one point there was talk of selling the intellectual property to the LTD co but it was decided against as the LTD company wouldn't have the funds and for tax purposes.
  • MonsoonMonsoon Font Of All Knowledge FMAAT, AAT Licensed Accountant Posts: 4,071
    Thanks Rachel, it does sound similar, yes. Apart from there being a legal document between the two entities, are you aware of any particular criteria that needed to be filled to ensure the IP remained with the individuals for tax purposes? Any 'market value' issues on the monthly licence fee?

    Thanks
  • RachelRachel Trusted Regular FMAAT, AAT Licensed Accountant Posts: 349
    The reason the LTD company x charged rent was because they were in the same building and a sort of way of proving the 2 were separate and that it was a business agreement.

    The 'market value' amount was difficult to gauge and due to the reduced profits the partnership did issue a large credit note at year end as the LTD didn't sell enough to warrant that rate. I think the agreement said it could change.
  • RachelRachel Trusted Regular FMAAT, AAT Licensed Accountant Posts: 349
    I just hopped on to VPN to find the agreement but couldn't sorry
  • MonsoonMonsoon Font Of All Knowledge FMAAT, AAT Licensed Accountant Posts: 4,071
    Thanks Rachel, that helps :)

    I'd be interested to know if anyone else has any experience of a situation like this?
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