Capital Gains Tax Advice

Katie2014

Hi everyone, I am hoping someone may be able to give me some general advice in regards to CGT...

I have a client who incorporated from a sole trader to a limited company back in Jan 2015. They were incorrectly advised that this was the best thing to do and now after many issues they have decided to close the limited company and trade as a partnership instead, which best suits their circumstances.

At incorporation, a van and tools were sold into the ltd co as assets at market value. As there was no gain with this transaction am I correct in thinking there is no CGT liability to the individual?

Now that we are in the process of closing the limited company, the assets (van and tools) will need to be sold to the partnership at market value so that they can be used within the partnership. Again, as there will be no gain, I am presuming there will be no CGT liability to the limited company?

In the above circumstances, if there had been a gain upon incorporation to the individual or disincorporation to the company, then would there have been a capital gains tax liability to the individual/company who was receiving the gain?

I am aware of incorporation and disincorporation relief (not in great detail yet) however I am unsure whether either of these would apply as the transaction is in regards to the van and tools?

Thank you in advance for your help and advice

MarieNoelle

Hi Katie
Plant & Machinary are dealt with via balancing allowances/charge and do not give rise to capital gains tax. Remember also that WDA/AIA are not allowable in the year of transfer.


If the trader and Ltd co jointly elect to transfer at TWDV under s. 266 CAA 2001 then you do not have to worry about balancing charges/allowances.

A CGT liability may arise on the transfer of other assets on incorporation (like goodwill) and again on disincorporation.

Katie2014

Thank you for your replies, they have been very helpful.

If possible do you know where it states that WDA is not allowable in the year of transfer as I cannot seem to find this anywhere?

WDA was not claimed on the assets in the sole trader business, however I had planned on claiming them in the first year of the limited company.

MarieNoelle

mrme89 said:

CGT is never applicable to companies.

Yes sorry - chargeable gain for the Ltd co in the latter case.

MarieNoelle

Katie2014 said:

If possible do you know where it states that WDA is not allowable in the year of transfer as I cannot seem to find this anywhere?

s55(4) and s65 of CAA2001


if the first year of the Ltd co is not the final CAP then I assume you could claim WDA.

Katie2014

Hi @MarieNoelle, many thanks for this.
You are right, the first year of the ltd co is not the final CAP so I believe that I can still claim the WDA.

RyanMIP

<blockquote class="Quote" rel="mrme89">CGT is never applicable to companies. </blockquote>

Never say never. Companies pay CGT on ATED-related gains. s.2B TCGA 1992.

MarieNoelle

RyanMIP said:

CGT is never applicable to companies.



Never say never. Companies pay CGT on ATED-related gains. s.2B TCGA 1992.

Hardly in point here is it