Transfer of Sole Trader to Limited company

Hi - I have promised to help a friend with the requisite paperwork to transfer her business to Limited company. However, it seems rather complicated and thus any advice available would be gratefully received!

She has been trading as a sole trader for 4 years (manufactures and distributes preserves) and needs investment hence the transfer to a limited company.

She has consistently made losses since the commencement of trading; she has only produced an income and expenditure account for HMRC Self Assessment requirements; no balance sheet
She has secured 4 investors who wish to invest £25k (1 x £10k, 3 x £5k) - they wish to benefit from EIS.
She has an impressive array of clients (including celeb chefs) and distributes to many prestigious retailers.
She has been working out of her home and has no business assets as such.
To enable the transfer to ltd company she has loosely valued the business at £100k thus she will be a 75% majority shareholder with the 4 investors comprising the remaining 25%.

Clearly the value is all goodwill based on reputation alone and thus she personally will be liable for CGT at 28% which I believe she can claim incorporation relief and only pay the CGT on sale of the ltd company.

In terms of her contribution to the limited company this will be transacted via the directors loan account.

Will this fly with HMRC - I ask as CG34 asks for valuation of the business, 3 years accounts etc

Am I missing anything else - any guidance would be very welcome....seriously out of my depth!


  • KernowAccountant
    KernowAccountant Registered Posts: 103 ? ? ?
    There are a MASSIVE number of issues here and some very bizarre remarks (if s.162 relief is being claimed (questionable in any case) what entries do you propose making to the DLA?).

    I began typing a more comprehensive reply, but I could spend hours covering the issues, starting with the basics. I note you have only registered on the forum today - I would hate to waste my time when my employer's clients would be paying between £50 and £120 per hour for much of this work.

    My best advice, respectfully, would be that your friend appoints a paid-for advisor.
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