Rent Rebate Treatment?

Hollysan Registered Posts: 68 Regular contributor ⭐
Hello everyone,

I would reall appreciate anyone's thoughts on this.... One of my clients sold his ltd co and retired. I have continued to work for the new directors since the sale. After they took over, they received a rates rebate for a period stretching way back, during which time my 'old' client incorporated, so the rebate covers the sole trader business, and then ltd co. It was agreed as part of the sale that if the rebate was paid, it would be time-apportioned, the amount relating to the sole trader business would go to the previous owner, my 'old' client, and the remaining would be split 50/50 between him on the one hand and the new directors on the other.

How should both parties treat this rebate for tax? It was part of the sale agreement, so would it be subject to capital gains tax? I am not licenced for capital gains, but my feeling is that the 'old client' should put the sole trader portion on his SA100 as 'other income' because he has ceased trading. He should treat his share of the ltd co portion down as a capital gain (it will be within the allowance). As it all relates to the period before the sale and was effectively part of the sale, although it took many months to sort out, how do the new Directors treat it?

I hope that makes sense, feeling a bit jaded at this point in January.

Thank you to anyone who can help.



  • Monsoon
    Monsoon Registered Posts: 4,071 Beyond epic contributor 🧙‍♂️
    For the chap who sold, if the rebate formed part of the sale, then this income is part of his proceeds of sale. It's chargeable to CGT in the period in which the gain becomes contractual, as opposed to when it's received, I believe.

    My noodle is baked on the treatment for the new directors - presumably it's Limited Company money so it's just a credit to rent expense??
  • Hollysan
    Hollysan Registered Posts: 68 Regular contributor ⭐

    Thanks very much for your reply, I think you are right about the new directors, baked noodle or not! Makes sense because it is a rebate on an earlier expense, it's just the agreement between the new and old directors confusing the issue.

    As regards the previous director, the portion that relates to his share of the ltd co. rebate should be treated as part of the proceeds of sale, yes, I'm comfortable with that. Will check about when it becomes chargeable, thanks for that. The bit I'm still not sure about is the portion which related to his sole trader days - surely that is just a rebate on an expense in the same way as with the ltd co? So, if the rebate had been paid whilst he was still trading, it would have increased his profit and he would have had to pay income tax and Class 4 NICs, so should he not just include it as other income?

    If anyone else has any thoughts on this last point I would be grateful.....

    Thanks again Monsoon, I really appreciate it.

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