Bring Assets from Self Employment into Ltd Co (or Not!)

vickidm
vickidm Registered Posts: 12 Regular contributor ⭐ ? ⭐
Hi All, I have just taken over the accounts of a new client. They were self-employed until 31st Aug 11, where upon they incorporated.

They have bought forward 10.5k Goodwill based on company TO, Mgt Salary etc (approved by HMRC), into the company as of 1st Sept 11. Which is fine, I understand this, and they are drawing this down as a DL.

However they have not bought fwd any of the other assets from the self-employment...From looking at the cessation accounts there is approx £1200 of assets detailed. However their camera equipment alone is worth double this. I am assuming (and will have to check) that these capital items were paid for through self-employment earnings but detailed as revenue expenses as opposed to capital (I will need to clarify this though). From going through their assets in detail their current NBV is approx 5.5k

They have also already filed their SAR for this yr.

In general the accounts are all just a little bit of a mess, and I am fine with correcting and tidying up most of this, but was just wondering in this situation what you would recommend

This does appear to be a genuine omission from my client as their last book keeper/accountant did not speak to them about the assets of self-employment, or tell them to keep capital purchases very much separate from revenue ones (Ok they perhaps should of looked at this themselves, so I'm not casting blame but hey ho).

Any advice on best way forward would be much appreciated

Comments

  • reader
    reader MAAT, AAT Licensed Accountant Posts: 1,037
    vickidm wrote: »
    Hi All, I have just taken over the accounts of a new client. They were self-employed until 31st Aug 11, where upon they incorporated.

    They have bought forward 10.5k Goodwill based on company TO, Mgt Salary etc (approved by HMRC), into the company as of 1st Sept 11. Which is fine, I understand this, and they are drawing this down as a DL.

    However they have not bought fwd any of the other assets from the self-employment...From looking at the cessation accounts there is approx £1200 of assets detailed. However their camera equipment alone is worth double this. I am assuming (and will have to check) that these capital items were paid for through self-employment earnings but detailed as revenue expenses as opposed to capital (I will need to clarify this though). From going through their assets in detail their current NBV is approx 5.5k

    They have also already filed their SAR for this yr.

    In general the accounts are all just a little bit of a mess, and I am fine with correcting and tidying up most of this, but was just wondering in this situation what you would recommend

    This does appear to be a genuine omission from my client as their last book keeper/accountant did not speak to them about the assets of self-employment, or tell them to keep capital purchases very much separate from revenue ones (Ok they perhaps should of looked at this themselves, so I'm not casting blame but hey ho).

    Any advice on best way forward would be much appreciated

    I would probably just transfer the TWDV (tax written down value) of the assets from the sole trader into the limited company and claim WDA's (writing down allowance) on this value. If the TWDV in the sole trader is nil (because the capital items were written off as revenue expenditure) then I probably wouldn't transfer anything to the limited company (as if you did, you would end up claiming tax relief on the same asset twice).
  • vickidm
    vickidm Registered Posts: 12 Regular contributor ⭐ ? ⭐
    Hi, thanks so much for the advice and for taking the time to respond in this 'oh so quiet' period for us all. Thanks again
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